Executive Summary
Some recent UK based company has been under a lot of criticisms due to its unethical conduct includes the fast fashion retail company among these Boohoo is significant. This report also looks at various issues that affect its business ethics; including wage violation in its supply chain and its effects on the environment. Laying out the details of Boohoo misconduct the report also employs three philosophical frameworks; Utilitarianism, Egoism, and Virtue ethics to determine the ethicality of the actions performed in the company by applying ethical decision-making theories. Advice is rendered according to the company’s code of conduct in order to assist Boohoo to embrace various high level ethical strategies for sustainable practices.
Introduction
Nature of the Business Ethics
Business ethics therefore encompasses those standards and norms by which individuals engage in business. According to Quierrez and Idian, (2020), business ethics is referred to as applied ethics that investigates ethical codes and standards in the business setting concentrating on people and companies. Scholars define business ethics as the study of moral principles and standards necessary in business practices, corporate decisions, and transactions along with fairness, truth telling, and respect for others.
Business Ethics therefore focuses of the responsibilities of business organizations to the society and the environment in their bid to make profits (Quierrez and Idian, 2020). Ethical business intentions to generate returns for shareholders and investors simultaneously, taking into consideration stakeholder claims to which they are entitled to comprising of employees, customers, communities as well as the environment.
Boohoo’s unethical business practices
Boohoo has faced severe pressure over unethical business practices and has committed to reforms from 2020. Apparently, a BBC Panorama report reveals that the company continues coercing the suppliers to slash prices at times by as much as 30% even after an initial agreement, thus increasing the pressure on the suppliers but also potentially deteriorating the working conditions (BBC, 2023). The firm has been under criticism after the exposing of investigating last year when Leicester factories supplying Boohoo were accused of paying the workers as little as £3.50 an hour that is the below of the UK minimum wage (Boohoo PLC, 2024).
This reveals the great extent to which workers’ labour is taken advantage of in the supply chain of Boohoo. It is such an activity that poses a serious threat to the establishment of human rights, not to speak of ethical business etiquette (Euro News, 2020). This compromises workers’ welfare and well-being, enforces wages below the UK minimum wage, and indirectly contributes to poor working conditions. Boohoo’s fiscal performance is however excellent. The revenue for the financial year ending February 2021 went up by 41% to reach £1.75 billion (Boohoo PLC, 2024). Boohoo faced criticism for significant environmental negligence because it was trailing competitors in sustainable practices (Nassar et al., 2023). The company had no energy transition progress, did not advocate for renewable energy, and had low-carbon material use in their supply chain. However, these practices carry very severe, long-term risks. The ongoing media attention, regulatory attention, and consumer pressure may result in reputational costs, penalties, and loss of customer loyalty.
Section 1:
Three philosophical bases
Figure 1: Three Philosophical Bases
(Source: Self-created)
1. Utilitarianism (Consequentialism)
Utilitarianism is a moral theory of actions that brings about the best consequences from an increase in the total happiness of all individuals involved. In this regard, the ethicality of the actions of Boohoo could be evaluated by the effects they generate for most majority of stakeholders. Utilitarian evaluation of Boohoo’s practices might compare the details entailing shopper value against the consequences that it imposes on workers and the climate.
2. Egoism (Self-Interest)
Egoism is an ethical theory whereby rational self-interest is held as the motivation for action since it is assumed that self-serving actions are beneficial – including to others (Nuraini et al., 2021). From an egoistic approach, Boohoo behaves according to its self-interest to make the business prosper, and yet, there are ethical concerns about whether succeeding in business means causing harm to such vulnerable parties as workers or the environment.
3. Virtue Ethics
Virtue ethics concentrates on the character and characters of individuals or corporations, as opposed to the consequences as well as principles that address the actions. From a virtue ethics perspective, therefore, the business ethics of Boohoo are defined by its failure or attempts at reform based on ethical virtues (Nuraini et al., 2021).
Applying three philosophical bases of the company
Utilitarian Focus: One must attempt to maximize consumer benefit.
At Boohoo it seems the business model is utilitarian, that is to provide affordable fashion to the people. The company aims to satisfy the consumer thus providing affordable chic clothing, and fashion for people sometimes with lower purchasing power than to buy brands (Quierrez and Idian, 2020). Boohoo’s thinking is utilitarian; the premise here is that ‘selling cheap fashionable garments with positivity impacting the lives of many’ is the right thing to do.
2. Egoistic Drive: Pursuit of Profit
However, this has been criticized on the following ethical considerations as it mainly pursues the egoism of attaining much wealth by improving Boohoo’s products, making those who produce the products work under very poor conditions (Sundararajan, 2021). If Boohoo is to operate under a model that is more ethically sustainable then the firm must deal with the clash between its financial interests and the need to avoid exploitation and harm to its workers and the environment it occupies.
3. Virtue Ethics: Ethical Leadership: Endeavour for Legal Quality
According to virtue ethics, one of the components of the company’s core ethic is to develop ethical goodness and responsibility (Sundararajan, 2021). This philosophy focuses on nurturing the character of the corporate entity to the extent that it will uphold the principles of equity, candour and responsibility.
These bases hurt the company as the company has faced a scandal related to labour, and the negative impacts like Labour Exploitation This company has been accused of vice in particular concerning labour dealings, especially with its contractors (Suddaby and Jaskiewicz, 2020). This also showed that the workers especially those in Leicester and other manufacturing areas are subjected to work under various unhealthy conditions and are paid remunerations below the set legal production wages that hurt their health. Reputation Damage Boohoo’s blurred organizational citizenship has led to organizational self-interest with the main motive being profit without considering the ethical treatment of employees or even the public; this has affected its reputation following scandals of exploitation of workers. This has also resulted in low levels of consumer confidence and unfavourable media outcomes concerning the brand (Suddaby and Jaskiewicz, 2020).
This scandal shows that Boohoo follows unethical business practices like Lack of Transparency policies show that Boohoo had little supervision over its supply chain while the abuses of the labour went unnoticed (euronews.com, 2024). Ethical business practices demand the management to be accountable in ensuring that even workers in foreign countries are treated right and paid wages that can allow them to make ends meet. Environmental Impact is also highly detrimental to the environment since it follows the Boohoo business strategy of making clothes that are cheap and expendable in massive amounts (euronews.com, 2024). These concerns as well as the issue of labour practices are indications that fast fashion causes pollution, waste and unsustainable use of resources.
Boohoo enhance the monitoring and conducts a thorough auditing of its chain to provide its consumers with an assurance that its workers are fairly remunerated and work under legal and safe circumstances (Bellucci et al., 2021). Third-party validation can offer such advantages as transparency that may help to dispel violations of labour legislation. Other recommendations include: The company should ensure that all the workers who have been involved in its supply chain both in the United Kingdom and other parts of the world should be paid more than the statutory minimum wage. This would enhance the lives of employees thus a show of respect of worker’s rights.
Section 2:
Ethical Decision-Making Concept
Figure 2: Ethical Decision-Making Concept Theory
(Source: Self-developed)
Ethical decision-making is the process of determining and choosing between options in a way that aligns with ethical precepts. This framework is present in moral philosophy and draws its conclusions about the action and its impact, making sure that the ultimate actions attained meet with consonance in terms of society and personal values (Corple et al., 2020).
Several theories underpin ethical decision-making. John Stuart Mill’s utilitarianism asserts that choices ought to be guided by the action that maximises general happiness or well-being for the greatest number of people (Walden, 2024).
Deontology, originating from Immanuel Kant, posits that choices should be based more on the level of conformity with moral rules or duties than on the outcomes that may arise (Walden, 2024). Virtue ethics tends to be associated with Aristotle and places good decision-making as dependent on the development of good character and, more particularly, the cultivation of moral virtues.
Boohoo’s Unethical Practices Using Ethical Decision-Making
The underpayment of workers and pressure on suppliers to reduce prices can thus be critically evaluated from an ethical standpoint of decision-making theories. A utilitarian would judge that the decisions made by Boohoo maximise profit over its own workers and supplies. Boohoo pays workers as little as £3.50 an hour while demanding suppliers offer reductions of as much as 30% (Boohoo PLC, 2024). Thus, Boohoo has the benefit of a few at the cost of the happiness and well-being of many stakeholders.
On the other hand, the actions of Boohoo are based on a deontological perspective since they do not correspond to moral duties and obligations; as fairness, respect for the rights of workers, and observance of legal rules such as the minimum wage laws of the UK (Walden, 2024). The decisions undertaken by Boohoo would go against morality simply because they take advantage and break some moral and legal rules at the expense of the inalienable dignity and rights of workers. Virtue ethics would therefore argue that Boohoo does not perform well in relation to corporate virtues such as fairness and honesty. Therefore, Boohoo practices do not portray the value of morality and ethical character.
Section 3:
Response of Leaders and Employees for Unethical Business Practices
Scrutinising a company like Boohoo against unethical business practices, the roles of leaders and employees are different. The leaders are held responsible for unethical practices since they set the tone and ethical culture of the organisations (Euro News, 2020). Boohoo’s leadership has been vocal about prioritising rapid growth and profit maximisation over respectable wage levels and fair working conditions (Boohoo PLC, 2024). The fact that the company was forcing its suppliers to reduce prices, even after deals were agreed on, manifests a form of lack of moral integrity and accountability by top managers. Leaders ensure the penetration of ethical business practices in the whole system, and in this case, the failure of Boohoo portrays significant weaknesses in leadership.
Another way that employees, especially at the mid-level of management, add to unethical practices is through the actions taken to implement decisions that encourage to continue exploitative behaviors (Walden, 2024). Employees even fear to comply with unethical directives, fearing that they may react in a counterproductive manner either due to revenge against them or to lose one’s job; in this way, the poison work environment is developed wherein normative behaviour becomes unethical behaviour. However, there are also moral responsibilities placed on the employee to voice objections and to act in any way within their power to resist such practices, though employees often have neither the authority nor the immunity from reaction by management.
Impact of Unethical Practices on Financial Results, Environmental, and Social Harm
There need to analyse the unethical practices by Boohoo, such as low pay to workers and aggressive suppliers through ethical decision-making theory. Applying the concept of utilitarianism, the firm’s actions put profit gain over the well-being of both the worker and the supplier for more than doubling its revenues (Walden, 2024). The Figure 3 Shows that share prices of Boohoo have fallen in the middle of 2020 for their unethical practices. The firm made 41 percent revenue, now standing at £1.75 billion for the financial year ending February 2021 (Boohoo PLC, 2024). Although these practices may ultimately benefit shareholders in the short term, they do not pass the utilitarian test of maximising happiness and minimising harm. The poor working conditions and financial stress that led to exploited workers and suppliers decrease overall wellbeing in society.
Figure 3: Declination of Boohoo’s Share prices for unethical business practices
(Source: Boohoo PLC, 2024)
Deontological theory argues that Boohoo has acted out of conformity with its moral duties. It pays less than the UK minimum wage to its workers, while compelling its suppliers to sell their products for lower prices against the corporate obligations to fair treatment of stakeholders with respect (Nassar et al., 2023). According to deontological concept of ethical decision-making theory, ethical decisions should be made by adhering to moral rules purely for their sake, and without regard for consequences (Thorisdottir and Johannsdottir, 2020).
As the virtue ethics of the concept of ethical decision-making theory, Boohoo’s leadership lacks ethical character because the company places profits before ethical values such as justice and responsibility. A fast fashion model encourages unsustainable modes of production that hurt the environment. Overproduction of cheap garments contributes to extreme waste, pollution, and emissions of carbon gases that further cause climatic change globally.
Section 4:
Recommendations for Boohoo
Recommendation 1: Implement Transparent and Fair Wage Policies with fare working conditions
Boohoo should commit to paying all its workers at its factories and all its suppliers wages fairly and clearly to become a responsible business. Suppliers should be audited regularly to ensure that they observe minimum wage legislations and good labour standards with fare working conditions and well-being (Nassar et al., 2023). Paying fairly and therefore clearly positions Boohoo as showing an intention of social responsibility enhancement by emancipating exploitation of working labour forces. This would not only improve its corporate reputation but also lead to better relationships with suppliers and employees, hence increasing productivity and loyalty.
Recommendation 2: Adopt Sustainable Production Practices
Boohoo’s current fast fashion model is highly responsible for degrading the environment. Boohoo must switch towards sustainable modes of production as its path towards ethical business practices. This will include sourcing eco-friendly materials, waste reduction, and investment in a circular economy through clothing recycling programs (Islam et al., 2021). Sustainable production reduces environmental footprints and aligns consumer demand for ecologically friendly products. Shifting production methods may incur high costs in the short term, but waste management and energy efficiency gains will eventually offset such losses. Environmentally conscious consumers attracted to sustainable practices will bring in new opportunities within the market and further the brand’s image.
Recommendation 3: Establish Ethical Supply Chain Management
Boohoo should enhance supply chain oversight through an ethical supply chain management system. This would encompass specific guidelines outlining ethical requirements for suppliers, regular audits, and cancellation of contracts from those who didn’t meet the set ethics. Ethical supply chain ensures that no workers get exploited as well as firms don’t engage in such practices that are environmentally catastrophic (New, 2021). This helps in minimising reputation damage and ensures that the business of Boohoo is in line with its public commitments towards fair practices. Strengthening supply chains also aids in building up trust from the consumers and other stakeholders for the purpose of long-term sustainability and reduced risks associated with unethical business partnerships.
Section 5:
Conclusion
Boohoo’s present unethical practices are against its survival and ethical standing in the long term. Wage transparency and sustainability issues along with ethical supply chain management, could be the means to change towards a more responsible business model for Boohoo. These recommendations would enhance the reputation of the company, guide its partnerships with other stakeholders towards betterment, comprise compliance with ethical and legal standards.
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Reference List
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Nassar, M., Goddard, T. and Freeman, R., (2023). ‘Walk the Talk: The Boohoo Case Study’. Journal of Macromarketing, 43(2), pp.274-282.
Nuraini, U., Restuningdiah, N., Sidharta, E.A. and Utami, H., (2021), ‘February. Based learning to improve students’ critical thinking skills in studying business ethics’. In International Conference on Strategic Issues of Economics, Business and, Education (ICoSIEBE 2020) (pp. 186-191). Atlantis Press.
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