Online fast fashion retailer cries “Boohoo”

By 24th July 2020 General News

Boohoo stocks plummeted 14.5% earlier this month after it emerged that the fast fashion retailer allegedly continued to operate in contravention to localized coronavirus lockdowns, and apparently without implementing any additional hygiene and social distancing measures in a factory in Leicester. Boohoo was also accused of paying the factory workers £3.50 an hour, which is less than half of £8.72 being the minimum wage in Britain for those aged 25 and over.

The blowback faced by Boohoo was almost immediate. Fashion retailers Next, Zalando, and ASOS swiftly dropped clothes and a commercial relationship with Boohoo. Critically, Boohoo’s shares had also consecutively fallen a further 12% during the week after a 16% slump on the Monday following the allegations made by the Sunday Times report, on 5 July.

The swift and detrimental impact on Boohoo’s stock price, reputation, and business, is a clear indication that there has been a seismic shift in the priorities of the markets, consumers, and investors from aggressive profitability to conscious capitalism. Moreover, a keen focus on environment, social, and governance (“ESG”) considerations has been heightened by the COVID-19 pandemic.

Health & Safety considerations have uniquely managed to make part of the public agenda and consciousness. The pandemic has also tangibly demonstrated that the society of 2020 views ‘integrity’ as a holistic concept and expects companies to act with integrity and treat compliance as a moral imperative, rather than a tick box exercise.

The drop in Boohoo’s share price is the strongest evidence that investors increasingly base their decisions on factors such as worker safety and commitment and adherence to ESG goals. Traditionally, ESG was the outlier in compliance topics. However, ESG has now evidently become a key focus and will need to become part of a company’s “joined up” compliance strategy.

This means that ESG should no longer be measured in the context of good Corporate Social Responsibility, but built into the company’s risk assessment tools, such as their counterparty appraisals, approvals processes, and boilerplate agreements.

The COVID-19 pandemic has put ESG compliance in the spotlight and companies must ensure they are on top of trends, assessing risks as and when they arise, and incorporating protections into their compliance frameworks to ensure that their businesses are acting in accordance with ethical, environmental, social and governance values.

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