On 12 November 2020, we hosted a roundtable event in conjunction with Camarco exploring how corporates and financial institutions are responding to the increased focus on ESG and sustainable investment. For a round-up of that session’s key takeaways, please click here.


We published an article on 24 July 2020 following allegations made by the Sunday Times accusing fashion retailer Boohoo of significantly underpaying workers at a factory in Leicester, and contravening local coronavirus lockdown rules by requiring its employees’ physical presence whilst failing to implement any additional safety or social distancing measures.

The article noted the negative impact that the allegations had on the company’s share price (which slumped by 16% in the aftermath) and attributed this, in part, to an increased focus on environmental, social and governance (“ESG”) factors as a result of the COVID-19 pandemic.

Consequences of the Levitt Review

One of the actions taken by the Company in the wake of the allegations was to commission an independent review by barrister Alison Levitt Q.C. The review substantiated many of the allegations, noting the company had “capitalised on the commercial opportunities offered by lockdown”[1] but had taken no responsibility for the consequences to those making the clothes they sold. Crucially, the review also found senior directors at Boohoo knew about serious issues pertaining to the exploitation of its workers months before they came to light.

So was this curtains for Boohoo?

Apparently not. The interim results statement published by the Company on 30 September 2020 stated that company profits were up 51% despite the furore over workers’ conditions during the same period. The Company also upwardly revised its income prediction for the year to 28 February 2021 and noted that its share price was up 31% from the beginning of the year.

This all makes for grim reading if you’d like to believe that a company’s ESG performance and, in particular, how a company treats its workers, impacts on its performance. On the one hand, it certainly appears to undermine our previous claims regarding the significance of ESG factors in investment decisions.

Yet this is 2020: the year of unexpected twists and turns. On Tuesday, the Company’s auditor PwC announced that it was standing down following the workers’ pay scandal, and Deloitte, KPMG, BDO and Grant Thornton announced that they would not be bidding for the contract; announcements that led to an immediate 20% drop in Boohoo’s share price.

Ethics v economics: a battle or a partnership?

So what does all this say about the importance of doing business ethically in 2020? Do unethical practices continue to prevail where they deliver economic results?

We would suggest not.

Whilst consumer and shareholder pressure failed to hold Boohoo to account, this can in some ways be explained by the wider context: firstly, online retail purchases during the pandemic reached an all-time high across the board, and it is likely that the surge in Boohoo’s customer base comprises many who remain unaware, in denial, or simply uninterested in the company’s ESG performance; and secondly, many investors continue to prioritise returns even when giving due consideration to ESG performance, particularly in instances such as this, where they may consider that the public spotlight on Boohoo would incentivise the company to clean up its act going forward.

It is also clear that the circle of relevant stakeholders that a company needs to consider when adopting ethical (or turning a blind eye to unethical) practices is wider than may have been originally considered, and includes other companies which are reluctant to tacitly condone behaviour that they themselves are working hard to stamp out.

It is perhaps no coincidence that the Big Four joined forces earlier this year to unveil a reporting framework for ESG standards, which, if successful, will mark the first truly co-ordinated approach to ESG reporting, prompting investors to move more money into the green economy.

As noted by Deloitte’s global chief executive Punit Renjen:

“It is important for us to have a common set of standards and if there is widespread adoption it will lead to change in behaviour.”[2]

Here’s to hoping that this is just one of many examples in which companies choose to hold each other to account in the fight to stamp out unethical practices, and incentivise investing in organisations that work for their stakeholders, society, and the planet.


[1] ‘Independent Review into the boohoo Group PLC’s Leicester supply chain’, Alison Levitt QC – 24 September 2020 (https://www.boohooplc.com/sites/boohoo-corp/files/final-report-open-version-24.9.2020.pdf)

[2] Financial Times: ‘Big Four accounting firms unveil ESG reporting standards’ – 22 September 2020 (https://app.ft.com/content/16644cb2-f0c1-4b32-b44c-647eb0ab938d)


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