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Human rights failure can be ‘existential risk’ to companies

08 July 2020

Consultancy issues warning as key UK online retailer is embroiled in a supply chain scandal.

It is alleged that some Leicester-based garment suppliers to Boohoo were paying staff lower than minimum wage and not deploying proper social distancing and PPE use.

At the time of writing, Boohoo’s share price had dropped 50% in three days.

John Perry, managing director of consultancy SCALA, said: “If a supplier’s practices relating to human rights, labour standards or environmental protection are found to be sub-standard, it is the customer company that will be held to account, as has already been the case with a host of major retailers having severed their ties with the Boohoo brand. 

“Adverse business impact can come about from problems in a number of areas, such as at the manufacturing source, in transportation or routing or, as we have seen here, in the manufacturer’s supply chain. Failure of one or more aspects may present a major or even existential risk to the company – as Boohoo has already found – which also highlights the need for increased supply chain resilience and robustness. 

“Businesses should therefore partner with suppliers that share their own ethical values, wherever possible. Establishing and communicating expectations through a supplier code of conduct is a particularly effective way for businesses to involve their supply chain partners in their efforts.

“By working towards greater transparency, resilience and ethical standards throughout their supply chain, businesses improve their own CSR credentials, while boosting their reputation and profitability.”

Boohoo has launched an independent review of its supply chain.

In a statement the company added: “This week a number of serious allegations have been made about the treatment of people working in the garment industry in Leicester.

“Boohoo [will] ensure that everyone working to produce clothing in Leicester is properly remunerated, at least the National Minimum Wage, fairly treated and safe at work. However, we will not hesitate to immediately terminate relationships with any supplier who is found not to be acting within both the letter and spirit of our supplier code of conduct. This includes very clear expectations on transparency about second tier suppliers.

“We are grateful to the Sunday Times for highlighting the conditions at Jaswal Fashions, which, if they are as described by the undercover reporter, are totally unacceptable and fall woefully short of any standards acceptable in any workplace. Our investigations have shown that Jaswal Fashions is not a declared supplier, and is no longer trading as a garment manufacturer. It therefore appears that a different company is using Jaswal’s former premises and we are currently trying to establish the identity of this company. We are taking immediate action to thoroughly investigate how our garments were in their hands, and we will ensure that our suppliers immediately cease working with this company.”