Boohoo links executive pay to ESG targets after supply chain scandal

Online fast-fashion giant Boohoo Group has pledged to link executive bonuses to progress against new ESG targets, after allegations of worker exploitation at supplier factories last year were found to be "substantially true".


Boohoo links executive pay to ESG targets after supply chain scandal

Image: Boohoo Group

The change was confirmed in Boohoo Group’s annual report this month and will come into effect for the payment of bonuses from 2022. Under the new rule, 15% of the annual bonus paid to executives will be tied to the delivery of the firm’s ‘Agenda for Change’ ESG transformation strategy.  

‘Agenda for Change’ was developed after Boohoo Group was accused of sourcing from UK factories that paid workers £3.50 an hour – less than half of the legal minimum wage for those aged 21 and over – in an independent review of Boohoo’s supply chain practices carried out by Alison Levitt QC and a study from the Centre for Social Justice and Justice & Care.

The business commissioned a review of the allegations last year, which concluded that most claims were “substantially true”. It then appointed Sir Brian Leveson, best known for his work on the tabloid phone-hacking enquiry, to oversee efforts to change supply chain requirements.

Detailed in ‘Agenda for Change’ are commitments to publicly disclose a full list of suppliers and manufacturers; appoint new experts in responsible sourcing and ethical compliance; establish a supply chain committee; publish a new responsible purchasing practices framework and add supply chain updates to board meetings.

Boohoo Group said in a statement that, while a direct link to the targets has only been made to 15% of bonuses, with the other 85% attributable to “the current financial performance conditions, its remuneration committee will have the power to scale back executives’ entire bonus if ESG progress is particularly weak.

“These changes are designed to ensure that the management team remains focused both on growing the business and continuing to make progress on addressing the supply chain issues,” Boohoo Group’s report states.

The move has been welcomed by the Environmental Audit Committee (EAC), which had criticised Boohoo’s practices on issues including worker rights and waste during its Fixing Fashion inquiries. The EAC has recommended that brands like Boohoo link executive pay to ESG to better build-in accountability.

“While it appears that only 15% of the bonus will be tied to ESG improvements, it is encouraging that Boohoo’s Remuneration Committee will have the discretion to scrap the entire bonus if these much-needed changes are not implemented,” EAC chair Philip Dunne MP said.

“I hope these powers are used to keep Boohoo’s management on track.

“Bonuses shouldn’t just be linked to breakneck growth. [The action on executive pay], alongside a commitment to join the Textiles 2030 climate targets, demonstrates Boohoo’s commitment to becoming a responsible corporate citizen. I hope we are reaching a turning point in fast fashion’s awareness of its environmental and social responsibilities and would encourage other firms to follow suit.”

Boohoo has already lost its contract to list on ASOS over the scandal. However, with lockdown restrictions having led to a surge in online shopping, and with Boohoo Group having acquired brands including Coast, Warehouse and Karen Millen in recent times, the firm posted a 41% increase in sales year-on-year. Some green groups have questioned whether this trend could mean reports of fast fashion slowing down during 2020 have been exaggerated.

The news comes after a PwC analysis of FTSE100 firms found that 45% are linking executive pay to at least one ESG target. 15% was found to be the average bonus proportion linked to delivery.

Wincanton

In related news, supply chain solution firm Wincanton has published a new ESG strategy this week. The firm’s business partners include Marks & Spencer, Loaf and The White Company and it operates some 200 sites across the UK, collectively covering more than 19,000 staff.

New environmental targets include reaching net-zero by 2040 across three key emissions areas – waste, property and transport. On the latter, the firm is striving to transition to an all-electric company car fleet by 2024 and to increase the use of biomethane and hydrotreated vegetable oil fuels for HGVs.

On waste, there is a commitment to ensure that plastic packaging contains at least 30% recycled content, in line with the incoming tax. Then, all single-use plastics will be phased out by 2030.

The social pillar of the strategy outlines Wincanton’s commitment to deliver a net-positive impact in the communities where it operates, and to deliver a “safe, inclusive and ethical” culture for present and prospective employees and partners.

Wincanton’s chief executive James Wroath said the strategy “marks a significant step-change” for the way sustainability is managed at the firm, citing increased concern around ESG issues at “all businesses” as a key driver of the update.

Sarah George

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