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Fool me twice: when do lofty ESG targets become greenwashing?

Georgie Lyon

Brands that fail to measure up to the targets they set risk reputation damage.

While its loyal shoppers are enjoying their freedom in nightclubs across the country, rocking out to Joan Jett & the Blackhearts, Boohoo has been busy attempting to mop up after its bad reputation because it very much has to give a damn ‘bout it.

Many of Boohoo’s target consumers are unperturbed by – or uninformed about - tales of the company’s bad governance, possible links to modern slavery and throwaway materials that are contributing to climate change. For now. The balance of convenience and low financial commitment with positive social impact and conscientious consumerism is shifting, and Boohoo is trailing behind in the fashion race.

It’s been serving the company well to sell fast-fashion and make good profits for its executives, but increased scrutiny means a strategy change is inevitable for the retailer.

Following a damning report by The Times, where a reporter went undercover in Boohoo’s Leicester factory in July 2020 and found wages far below the legal minimum and conditions in which Covid-19 could prosper, while staff were expected to work during lockdown even if they exhibited symptoms of the virus. The allegations by The Times were disputed by the factory, but landed Boohoo firmly in the middle of a modern slavery investigation. If consumers are so conscious of ethics, how are they still trading?

A report in 2019 by the House of Commons environmental audit committee criticised wage exploitation in Leicester and across the fashion industry in general. The Chair of the committee put out a call to action for consumers who buy organic, Fairtrade or free-range groceries but ignore the problems in the fashion sector.

Boohoo announced that it had “terminated relationships with suppliers” if there was “evidence of non-compliance with [Boohoo’s] strict code of conduct”. But how strict can a code of conduct be if such deep-rooted problems can exist in the supply chain? In 2017, Channel 4 sent a worker undercover in factories supplying retailers including Boohoo; they were paid minimum wage. A 2018 government report found a “perceived culture of impunity” creating a microeconomy where fair factories are outpriced by rivals that underpay their workers. A Financial Times article in 2019 explored the labour exploitation in Leicester and, in a later article, a manufacturer told the Financial Times in 2020 that it did not bid for Boohoo’s work because the prices it drives don’t cover manufacturing costs. It’s hard to suspend one’s disbelief around Boohoo’s supposed code of conduct.

In October, Alison Levitt QC conducted an independent review at the behest of Boohoo. Among other things, Levitt criticised the lack of transparency in the supply chain – the company was unable to produce a full list of its authorised suppliers and unapproved subcontracting ran wild.

A second report by Leveson called change at the company a ‘work in progress’.

Optically, the tide may be turning in Boohoo, with two QCs drafted in to dig through the company’s failings, and help the company lead a change management programme. The trouble is, reputationally, it’s taken a lot of damning reports for the company to act. When a problem is discovered, springing into action to rectify the problem and prevent it recurring is key to recovery. Better yet, having a robust monitoring programme that spots issues before they become a crisis is a way to minimise media scrutiny.

A report by Sky on 30 July 2021 found that a worker in one of Boohoo’s ‘approved’ suppliers is still being paid below the legal minimum wage via an underhand scheme where workers are paid the correct amount on paper, and are made to pay some of it back to the factory in cash. The reason given? Factories can’t afford to pay minimum wage because of the low price point of the product. The responsibility rests squarely with Boohoo, whose business model must absorb the ethical cost of labour if it is determined to sell products at such low prices. Boohoo is front and centre of the reports about its suppliers, demonstrating that a consumer-facing brand will shoulder the reputational damage of its supply chain. Boohoo’s illegal labour problems are alive and well despite renewed efforts around transparency and supply chain management – the question is whether Boohoo is asking enough questions to fix the problem, or just enough to fulfil its perceived obligations in a strange example of caveat emptor.

Likening Boohoo to the producers of combustible engines, CEO John Lyttle told the BBC yesterday that sustainability would require a 2030 timeframe for Boohoo. Without transparency and clear metrics, these targets don’t feel dissimilar to the proposed Cumbrian mine which will meet net zero in 2050 by closing in 2049.

Boohoo had an opportunity to be a force for good. Now any good it does feels like repaying its debt to society. In May this year Boohoo announced it was linking executive pay to ESG targets. This change is only meaningful where targets are reasonable and progress is measured against defined metrics. This is challenging in an industry where there has been no agreement on what constitutes sustainability.

In the 2021 ‘Synthetics Anonymous’ report by Changing Markets, experts expect synthetic fibres to represent three-quarters of materials in textiles by 2030, an increase on today’s 69%. Boohoo is considered by the report to be the worst offender for its extensive use of synthetics, with 85% of its products containing synthetics and an average of 75% polyester composition per garment. This was the highest of any brand covered in the report. From its materials to its manufacturing, it appears that Boohoo would struggle to be any less sustainable than it is at present, even after years of bad press and systematic highlighting of shortcomings. And yet, yesterday, Boohoo announced the creation of 5,000 jobs as part of a 5-year plan. Usually a positive statement from a company, it’s hard to divorce this from a question around how much these new employees can expect to be paid – a reputation hangover from Boohoo’s wage woes.

Some consumers, though, don’t really care where their clothes come from. These buyers will always exist but the numbers of those consciously choosing to shop ethically are increasing. How far up the garden path can Boohoo lead policymakers and stakeholders before they demand a refund? If we get to that point, Boohoo’s reputation will not only be irreparable but perhaps the business itself unsalvageable.