Have we learned the right lessons from the Boohoo scandal?

Katie Fowler is Director of Responsible Business at the Thomson Reuters Foundation and leads the Workforce Disclosure Initiative, the Foundation’s programme to improve corporate transparency and accountabilty. 

A few weeks ago, Boohoo launched a huge fundraising round as its latest earnings report revealed the company continues to hemorrhage profitability. It is the latest act in the financial woes of the fast fashion giant, stemming from a 2020 Sunday Times report that exposed workers in one if its supplier factories toiled in appalling labour conditions for less than half minimum wage.

The fallout from the scandal was immediate. Boohoo’s share price tumbled, and £1.5 billion was wiped off the brand’s books in just two days.  Forty nine institutional investors then sued the company, alleging it made misleading statements, and failed to disclose information about the issue.  

If the lawsuit leads to a settlement or judgement against, Boohoo will be required to pay significant financial penalties, putting its future in jeopardy. 

You would be within your rights to ask, is that really justice? What difference does it make to the factory workers making Boohoo’s clothes? What will it mean for the lives of workers around the world caught up in other exploitative supply chains? 

Actually, it means more than you might think.  

As a former chief executive in the child rights NGO sector, and more recently in social impact consultancy, I have seen the devasting effect of irresponsible business practices on children, families and communities throughout the supply chain.  

But I have also witnessed how pressure - whether it be the threat of spooked investors pulling out or an outraged public voting with their feet - can compel business to be more open about workforce issues. 

In Boohoo’s case, the company recruited specialists in labour rights and ethics to an oversight committee that would audit their supply chain, implemented penalties for suppliers that failed to meet their labour standards, released lists of their approved suppliers and joined the Ethical Trading Initiative. In 2023, they reported an 89% decrease in use of suppliers flagged as high risk due to non-compliance with labour standards.  

Transparency like this enables faster identification and resolution of other potential abuses in the supply chain. The accountability and visibility further incentivise the company to eliminate such practices.  

And it has a knock-on effect.  

When companies disclose the details of their direct operations and supply chains it can pressurise their competitors. The 2020 Sunday Times expose put the spotlight firmly on the fast fashion online retailers that boomed during lockdowns. ASOS and Misguided subsequently committed to publishing lists of suppliers and better auditing. 

The message here should obviously not be that we must wait for companies to be exposed for pre-existing labour and human rights abuses to galvanise change. There are plenty of ways to sustain this type of pressure proactively.  

At the Thomson Reuters Foundation’s Workforce Disclosure Initiative, more than 140 major companies disclose information on workforce issues across their operations and supply chains, from diversity and inclusion to labour conditions. This year that data covered more than 8 million workers.   

The longer companies participate in WDI, the more data they disclose, creating a pattern of transparency. Crucially, businesses use the disclosure process to take an in-depth look at their direct operations and supply chain to get ahead of shortcomings and risks. 

WDI is a voluntary initiative, and companies provide information that goes way beyond legal reporting requirements. Yet the findings from our latest report highlight how much of an impact the prospect of regulation and legislation can have, with an emerging regional split. 

Seventy five percent of European and 85% of UK companies could disclose at least one action they had taken to address human rights issues in their supply chains. This is compared to an average of 48% elsewhere. 

Feedback from companies suggests this is due to legislation across both regions scheduled for 2025/2026, which mandates detailed reporting on environmental, social and governance practices (ESG). 

But in the U.S. we see the opposite trend. A recent backlash against “woke” ideology within the Republican party has put ESG under scrutiny. Transparency on these issues has been criticised for prioritising environmental concerns and individual rights over profitability and shareholder value. Some states have even passed laws to block state pension funds from considering ESG factors in their investment decisions.  

Early rhetoric from the incoming Trump administration suggests this is unlikely to change any time soon. If U.S. companies know they will not be scrutinised on ESG, or could be penalised for prioritising it, it eases the pressure. And when the pressure eases, companies tend to revert to type on transparency.  

The U.S. houses some of the largest companies in the world, with sprawling supply chains that touch communities on every continent. As we learned from Boohoo, the ramifications of such companies not being transparent on the labour conditions of workers could be devastating for human rights.  

Ultimately, we live and work in a global economy and must take a global approach to promoting transparency and responsible business practices. Solutions cannot be bound by regional borders and politics. I remain hopeful that, just as Boohoo found out the hard way, transparency is the catalyst for change.