Last week, Boohoo reported a surge in profits despite damaging revelations about its supply chain and poor treatment of workers. As the world of retail pivots towards social responsibility, the bumper results could be seen as consumers rejecting the importance of brands’ embracing purpose. While Boohoo was able to reap in revenue, it is still essential companies future-proof their businesses by rooting out inequalities within their supply chains.
In the immediate aftermath of the wave of bad press for Boohoo, £1bn was wiped off the value of the retailer and its shares tumbled 23 per cent. Investors care about corporate responsibility, even if it is not translating into falling profits just yet. It matters to consumers too and there is a clear trend over the last decade of them placing more importance on purpose and reputation.
To build long-term relationships with both investors and customers, responsibility is key. Accusations of “greenwashing” against some brands happen for a reason. These false efforts to embrace responsible production are damaging, but nonetheless they are a weather vane for public opinion. Consumers will return to brands that make them feel good about their purchases, that share their values and make them feel as though they are playing their part in tackling global crises.
Boohoo’s success is riding on what might turn out to be the last tailwinds of fast fashion. Shifts in behaviour often lag behind changes in people’s attitudes – essentially the talk vs the walk. Consumers can often claim they want to buy more sustainably but not follow through at the till – low prices will always be a draw for some who are simply unable to afford the pricier ethical choice.
But companies will continue to be penalised for failing to keep up with changing public values. Victoria’s Secret, once the crowning glory of lingerie, failed to stay abreast of values of diversity and gender equality. Its campaigns were outdated and as its relevance dwindled, sales slumped. The UK division eventually fell into administration.
There is also the threat of legislative intervention from government, who are increasingly putting pressure on the private sector to play its part to fight climate change.
Businesses need to give customers a reason to choose them and keep choosing them. It’s a delicate dance for the giants of fast fashion. For years, shoppers have demanded value, speed and convenience. Those metrics have not changed, they have just been given a new test: responsible supply chains, fair pay and minimising environmental impact.
H&M is doing its best to learn the footwork. It has been vocal and proactive about the need for change in the fashion industry and is working to move its business to a more circular model. But it is a tricky path to walk and the brand’s decision to bring onboard Game of Thrones star Maisie Williams to front its sustainability campaign brought criticism from some climate campaigners.
Boohoo is not blind to its faults. It has launched its Agenda for Change programme to transform its business practices including commitments to create clothing resale and recycling offers across its portfolio by 2023. The test will be making this reality. Its recent acquisition of brands including Dorothy Perkins, Wallis and Burton give it an opportunity to show consumers it is trying to hit the reset button.
But ultimately, brands need to get their head around the ESG agenda, not just to attract investment but to differentiate themselves in customers’ eyes. Behaviours take a long time to shift but so to do corporate reputations.