Modern Slavery Allegations Against Boohoos Supply Factory in Leicester

Introduction

The claims of exploitation of workers amounting to modern slavery were made against a supply factory of Boohoo in Leicester when it was found that workers at the factory involved in making clothes for Boohoo's Nasty Gal brand were paid only £3.50 an hour (BBC, 2020). The claims have come in the backdrop of a wider investigation by the National Crime Agency into Leicester's textiles industry over allegations of exploitation (BBC, 2020). The allegations against the supply factory for Boohoo are serious considering that the wage being offered to the factory workers is significantly lower than the national minimum wage which is £8.72 an hour. The allegations into exploitation of workers are not just related to the minimum wage though and also involve allegations of forced work during coronavirus pandemic with reports that the workers who are sick with the Covid 19 infection are also being forced to come into work (BBC, 2020). For students researching business dissertation help, these allegations are going to highlight the complexities and ethical considerations within supply chain management in the fashion industry.

This Part will provide an overview of Boohoo and explore the issue related to the modern slavery and exploitation claims against Boohoo supply factory in Leicester, and discuss whether the supply factory actions can be termed as modern slavery in relation to academic and legal definitions of modern slavery including in the EU law, and discuss the effects of these actions on the key stakeholders as per the stakeholder map.

Boohoo

Boohoo is a UK based company, which is involved in the business of fashion retail. The company was founded in 2006 by Mahmud Kamani and Carol Kane. The company has often come into criticism for its fast fashion model that is considered to be harmful for the environment as well as the labour (Laville, 2019). Of special relevance to the essay is the focus of the company to provide cheap high street fashion to its customer base in the age group between 16 to 24 years, which means that it had to keep its costs low (Laville, 2019). This may be one of the reasons why the supply factories to Boohoo are also required to keep the labour costs low.

The BBC report

The current allegations and criticism of the company stem from two important revelations made in a news report written by an undercover reporter who posed as a worker and sought work at the Leicester factory that supplies clothes to Boohoo in July 2020 (BBC, 2020). The name of the factory is Jaspal Fashions and it has been a long term supplier to Boohoo (BBC, 2020). The reporter was informed by the factory manager that they could only expect to be paid £3.50 an hour. This is less than half of the actual national minimum wage in England. The reporter also revealed that there were workers with Covid 19 infection who were made to report at the factory for work despite being sick and in contravention of the lockdown in place and that there was minimal adherence to the Covid 19 precautions and distancing measures in the factory.

These two issues have led to the allegations and claims of exploitation and modern slavery against the Leicester factory that supplies to Boohoo and has led to the need for Boohoo to investigate the issue. The company has clarified that if these allegations are true, then it would take action as it violates the company policy.

The important issues that are raised in this situation are whether the actions of the supplier amount to modern slavery. Boohoo has clarified that they are taking immediate action to investigate their link with this specific supplier as there is some doubt as to whether his supplier is indeed linked to Boohoo directly or through some other supplier (BBC, 2020). This is relevant to current practices within the fashion industry where suppliers to the brand are typically first-tier suppliers which are known to the company while there are suppliers beyond the first tier that are not known and exist outside the immediate scope of influence (Voss, et al., 2019). In Boohoo case, if the company is not able to identify the supplier factory as a known supplier to it, this is not unusual in the fashion industry that is known to have a fragmented supply chain with first tier and beyond first tier suppliers.

Modern slavery and exploitation

There is no comprehensive definition of modern slavery although it is identified as an umbrella term that can relate to different forms of exploitation including labour exploitation (Voss, et al., 2019). Modern slavery has been defined as a “system of dishonoring and degrading people through violent coercion of their labor activity in conditions that dehumanize them” (Kara, 2017, p. 23). This can include the payment of less than adequate wages and forcing people to work when they are sick or forcing people to work in less than safe work environment. Modern slavery can be defined as “holding a person in a position of slavery, servitude forced or compulsory labour, or facilitating their travel with the intention of exploiting them soon after” (Public Health England, 2017). Therefore, forced labour would come within the definition of modern slavery. At the core of the issue that is currently being investigated with regard to suppliers to Boohoo is the possibility of forced labour, exploitation and modern slavery. It has been said that at the “core of forced labour is the nexus between an individual’s vulnerability and a setting in which this individual’s work or services can be exploited for profit without too much risk of discovery or prosecution” and that forced labour is “primarily an issue of exploitation” (Joseph Rowntree Foundation, 2014, p. 6). Non payment of minimum wages, purposeful isolation at work, and confinement to workplace are some of the common ‘strong’ forced labour indicators (Joseph Rowntree Foundation, 2014). In this situation, the workers of the concerned supply factory were made to work in the factory at the time of the lockdown regardless of their having been infected and putting other workers also at the risk of infection. Moreover, they were alleged to have been paid much lesser than the national minimum wage. This opens the situation to an allegation of modern slavery.

There are different laws in the UK that are meant to respond to the conditions of forced labour and exploitation at workplace. The Modern Slavery Act 2015 was enacted by the UK and one of its provisions is that it requires companies to prepare and publicise statements explaining steps taken by them to ensure that slavery and exploitation is not taking place in any of its supply chains. There are some industries that are considered to have more prevalence of forced labour, and this includes textiles (Skrivankova, 2014). Moreover, textile manufacturing industry also has small to medium sized businesses which may not come within scope of regulation and which may involve more exploitation of worker rights (TUC, 2008). The Gangmasters and Legal Abuse Authority was also established to provide a system under which exploitative work practices against workers could be checked and punished (Joseph Rowntree Foundation, 2014). This is in addition to the Modern Slavery Act 2015, which seeks to eradicate labour. Finally, Section 71 of the Coroners and Justice Act makes it a punishable offence to hold a person in slavery.

The question is whether the actions of the supplier factory amount to modern slavery as per the academic and legal definitions of the concept of modern slavery. As per the definitions discussed above, where modern slavery includes forced labour and related practices (Voss, et al., 2019), it can be said that the actions of the supplier in forcing the workers to work while sick and in unsafe environment due to the pandemic as well as the payment of less than the minimum wages, if proved, would amount to modern slavery. This is because the establishment of these claims would prove that the supplier has indulged in exploitative labour practices which come within the definition of modern slavery and are also barred by legislation in the UK. The Modern Slavery Act 2015, Section 54 provides that companies are under an obligation to report on efforts undertaken to identify, prevent, and address modern slavery in their supply chain.

Key stakeholders

Stakeholder are defined as groups or individual affected by the achievement of the objectives of the organisation (Kessadayurat, 2011), and can include employees, customers, shareholders, suppliers, media and the civil society (Zech, 2013). The key stakeholders that are affected by the allegations of modern slavery in Boohoo are investors, employees, workers in supply chains, and the media and the wider society.

The investors of the Boohoo company were affected by the allegations of slavery in the company. Immediately after the BBC report in July 2020, the shares of Boohoo lost more than 16% value (BBC, 2020). This was a significant loss for the investors of the company and has put them under pressure. The investors are also likely to be worried about future actions and are interested in full investigations so that the truth can be revealed and the company can respond to the same.

The employees are also impacted as stakeholders as they are required to respond to the media criticism and pressure by groups like ‘Labour Behind the Label’ which have been highly critical of the company and its suppliers and have been pressuring the company to respond to the worker rights exploitation in Leicester. The employees are required to engage with the media and also respond to social media campaigns and comments.

The workers in the supply chain factories are also stakeholders because they are at the centre of the controversy. There are workers who have spoken to the media and told them about the exploitative practices at the Leicester factory. These workers are the stakeholders because they are also impacted by the actions of Boohoo in audit of the supplier factories.

The media and general public have been vocal about the events at the Leicester factory and their attention to the issue has placed pressure on the company and its investors. This has led to the decision by the company that they would conduct a thorough investigation into the Leicester factory and also other factories that are involved in the supply chain. Boohoo has been under pressure to conduct an audit of all of suppliers' manufacturing facilities from even before the BBC report in July 2020 because of the general concern in the media about the conditions of work in the British textile industry. Therefore, media and the general public forms an important stakeholder in this case which has had an impact on the decision making within the company to hold a full audit of all suppliers in the supply chain of Boohoo (BBC, 2020).

Introduction

A network perspective on stakeholder management can be utilised for identifying the stakeholders that are part of the entire activity of the business and thereby affected by it and is also useful for the purpose of identifying business opportunities (Vandekerckhove & Dentchev, 2005). Issue focussed stakeholder management can also be useful for addressing specific issues that impact the stakeholders of the business (Roloff, n.d.). In the context of textiles industry and the problem that this essay is concerned with, that is, the exploitation of the factory labour in the supply chain, the stakeholder engagement theory can be utilised to identify the multi-stakeholder networks that are not entirely within the control of the business (Roloff, n.d.).

Theoretical framework

The UN Human Rights Council has adopted the Guiding Principles on Business and Human Rights for the ‘Protect, Respect and Remedy’ Framework in 2011 which was formulated by Ruggie (2011). The framework contains an important principle in that it emphasises on the responsibility of the business to respect human rights (Ruggie, 2011). According to this principle, the business enterprises are under a duty to act with due diligence so that their activities are not responsible for the infringement on the rights of others (Ruggie 2011). The process that can be applied by businesses to ensure that due diligence within the supply chains is being applied by the business is given by the OECD (2010). There are three questions that a business can answer with regard to supply chain due diligence. The first question is whether the supply chain entity is known. In this case, there is some doubt about that because while Jaspal Fashion in Leicester is identified as the entity, the entity itself in question is closed since 2018 and Boohoo is not able to identify who the supplier in this case is (BBC, 2020). Once Boohoo identifies the supply chain entity, it has to ask itself whether there are adverse impacts of the relationship with the entity (OECD, 2010). The report by BBC (2020) already notes these adverse impacts, but these have to be verified by the company investigation. The third question is whether Boohoo is contributing to these adverse impacts (OECD, 2010). The answer to this question is in the affirmative as the following section will explain in some detail.

Affirmative answer

Boohoo does not support exploitative labour practices in its supply factories, but it has done little to address the issue of exploitative practices by supply factories within a fragmented supply chain environment, in which it is supplied clothes not just by its first tier suppliers, but also other suppliers beyond its first tier that it cannot identify. Therefore, Boohoo has also contributed to the problem of exploitative practices in the labour relations in the supplier factories in Leicester through its failure to address the issue. This is also problematic in the context of the legislation because the Modern Slavery Act 2015, Section 54 provides that companies are under an obligation to report on efforts undertaken to identify, prevent, and address modern slavery in their supply chain. If the audit by Boohoo shows that the allegations made by BBC (2020) are justified and that the supplier is indeed involved in such practices and is also supplying to Boohoo, it will prove that the company has failed to stem the problem of unethical practices in the supply chain. Another point to be noted is that the company seeking to undertake a full audit under pressure from stakeholders at this time only shows that the company has not done so in the past. This goes against its legal obligations under the Modern Slavery Act 2015, Section 54.

Solution

It is proposed that the solution to this problem can be found in the company undertaking routine audits of the suppliers in the supply chains (Appolloni, et al., 2013). This would involve a cost on the part of the company as audits would involve expenses; however if a cost benefit analysis is done of this step, then it is justified. By undertaking routine audits of the supply chain suppliers, the company will be able to identify potential problems in any supplier’s premises like labour abuse practices. This can be done by speaking to the labour union representatives, if involved, as well as employees in the factories in a free and safe space so that they can speak openly about their issues, problems and experiences with the labour environment in the factory.

Audit would help the company to resolve the issue by either giving time to the supplier to correct the problems or by letting go of the supplier. Considering the current levels of profits that the company is making, the costs are minimal. However, considering the ability to avoid potential future scandals that can harm the company’s reputation and erode share values, the benefits are outweighing the costs. The ultimate benefit to the company is that timely audits will lead to the identification of the potential wrongdoing in the supplier factories that can cause scandal for the company and instead, managers would be able to respond to these problems before hand. In this situation, had Boohoo conducted timely audits of the supplier factories (knowing that the Leicester factories are already involved in scandals related to labour abuse), then it could have led to an early intervention by the company in the problem and allowed the company to avoid scandal and erosion of share value.

Discourse Ethics

Discourse ethics was evolved by Jürgen Habermas. (Gilbert & Rasche, 2007). Discourse ethics provides that procedure or process of decision making is ethical if stakeholders are in consensus, which requires three elements: stakeholders are informed, able to speak and free from fear and pressure. Discourse ethics can be applied by the business firm through application of communicative action involving different stakeholders so that there is a shared understanding of the situation and conflict resolution on norms and values is done on the basis of such shared understanding (Gilbert & Rasche, 2007). Discourse analysis is particularly relevant to the issue at hand, because the non payment of minimum wages as well as forced labour in the time of pandemic raises moral questions about the relationships around labour and not just legal questions. If these allegations are true and proved, then there are conditions of human slavery or forced labour that are involved and these are problematic moral issues that can be resolved going forward using discourse ethics. Habermas had developed discourse ethics, as a comprehensive social theory and that would advance the goals of human emancipation, and use an inclusive and universalist moral framework. This is particularly relevant to the problem at hand because the payment of less than half of the minimum wages to workers and forced work during sickness are examples of activities that are opposed to goals of human emancipation.

Applying Discourse Ethics, in this situation, Boohoo can use dialogue and talk with the stakeholders of trade unions and workers in the supplier factories as part of its audit of the factories. Such dialogue should be carried out in safe zones within or outside the factories so that the stakeholders are able to talk and express themselves freely and without any pressure. When audit is being done, Boohoo should ensure that equal respect and solidarity responsibility is undertaken for everyone so that resolution can be done through universally accepted and acceptable moral and ethical consensus. Audit that is done under a framework of discourse ethics will also help Boohoo attain the objective of knowing how employees of the factories that supply to it are treated and to be ready with effective interventions if audit reveals mistreatment of labour.

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