Independent review conducted after reports that contractors were paying workers less than minimum wage.
Boohoo Group Plc ignored warnings about significant labor violations at U.K. garment contractors, according to an independent review. The fashion retailer pledged to improve its auditing to fight such abuses.
Alison Levitt, a lawyer and former U.K. public prosecutor, led the review after reports of contractors that were paying less than minimum wage and skimping on safety precautions in Leicester amid a flareup of Covid-19 cases. Shares in Boohoo rose as much as 21% in London Friday morning.
“Growth and profit were prioritized to the extent that the company lost sight of other issues,” Levitt wrote in the report. “There were a series of warnings and red flags, both from inside and outside the company, which Boohoo ignored. By the time they began to take notice, it was too late.”
The company previously said that since 2016, it has been carrying out regular unscheduled inspections among suppliers in Leicester. Since then a number of investigations published in U.K. newspapers have alleged continuing violations of labor guidelines.
Levitt said she found evidence that workers at suppliers were indeed underpaid, and that generally inspection visits were announced ahead of time.
“If Boohoo is not prepared to take a long hard look at itself then the long-term prospects are bleak,” wrote Levitt.
Boohoo previously was accused of encouraging suppliers in Leicester to undercut each other on pricing, which critics said meant factories then cut corners on employee wages. Boohoo is by far the biggest user of factories in that city. Other rivals including Next Plc and Primark do not work in Leicester anymore.
Levitt recommended that Boohoo strengthen its sourcing teams and purchasing practices and had mandatory education and training for its buyers so they better understand the supply chain. There will be disciplinary procedures for any buyers who place orders with unauthorized suppliers.
Boohoo, which has previously been reluctant to publish the names of its suppliers, saying that’s commercially sensitive information, has now committed to listing the factories it works with every year. It will also invite new suppliers “who have a track record of ethical and sustainability practices.”
The chain will also set up a garment and textiles community trust to “address hardship experienced by those working in the local garment industry”. It will also work more with groups helping workers to understand their rights better.