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SLA ditches Boohoo over worker allegations

The asset manager said the fast-fashion retailer's response to allegations of poor working practices in its supply chain were "inadequate"
July 10, 2020

Standard Life Aberdeen (SLA) has sold the bulk of its shares in Boohoo (BOO) following concerns over the progress being made in tackling allegations of poor working practices in its UK supply chain.

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The fast fashion retailer launched a review of its UK supply chain following allegations in The Sunday Times surrounding working practices in a factory that has handled the group’s garments. 

However, SLA, a top 10 shareholder in the group, said that after engaging with Boohoo’s management team a number of times this week, it found the online retailer’s response to the allegations was “inadequate in scope, timeliness and gravity”.  

A spokesperson for Boohoo said it had been engaging extensively with shareholders and continued to take on board their feedback. 

“We believe that our actions taken this week, including our recently announced independent review, make it very clear just how determined we are to ensure that our entire supply chain adheres to our Code of Conduct,” the spokesperson said.  

The review came prior to news that fellow fast fashion retailer Quiz (QUIZ) was investigating allegations made in The Times that one of the Leicester factories used to make its products had failed to comply with National Living Wage requirements. Quiz said it believed that the subject of the complaint was a sub-contractor, which had been used by one of its suppliers based in Leicester "in direct contravention of a previous instruction from QUIZ". Activity with that supplier has been suspended and Quiz said it was undertaking a review of its supplier auditing processes. 

Prior to the divestment, three of SLA’s sustainable funds had at least 3 per cent of assets invested in Boohoo, according to data provider Morningstar. That included 4.4 per cent of the assets of ASI UK Impact Employment Opportunities Equity, a fund that aims to promote and implement good employment opportunities and practices. 

Aberdeen Standard Investments deputy head of UK equities, Lesley Duncan, said that when SLA first invested in Boohoo in 2014, it had passed the asset manager’s ethical screens. However, since then it had lobbied the company to improve its management of supply chain transparency, environmental efficiency and working conditions, she said.  

“While we would have liked progress to have been quicker we did feel that progress was being made,” said Ms Duncan. “However, in the last few weeks our concerns have grown on the progress being made, which even before recent developments, had negatively impacted our conviction levels in the company. 

Merian Global Investors, which owned 9.6 per cent of the group’s share capital, according to FactSet data and was the largest institutional shareholder, said it would continue to hold Boohoo. A spokesperson for the asset manager said it had been actively engaging with the company over its clothing suppliers in Leicester and had previously undertaken site visits to several of Boohoo’s UK suppliers to further understand the group’s approach to supply-chain management. 

“We have been given strong assurances by management that any suppliers found to be in breach of the company’s strict code of conduct will be terminated immediately and we will continue to engage with the firm regarding this situation,” the spokesperson said. 

The Sunday Times article followed a report by activist group Labour Behind the Label published last month, which accused Boohoo of sourcing clothing from Leicester suppliers that have put workers at risk during the coronavirus pandemic. 

Boohoo described the conditions at the Jaswal Fashions facility highlighted by the newspaper, which included payment below the minimum wage, as “totally unacceptable”. The fast fashion online retailer said that Jaswal Fashions was not a declared supplier and was also no longer trading as a manufacturer. It also rejected accusations of responsibility for Leicester’s recent surge in coronavirus infections.