CSR: when auditors cease working with companies accused of bad practice

On October 19 the UK subsidiary of the professional services consultancy firm PwC, confirmed it was ceasing its auditing services that date back to 2014 of the online Boohoo clothing sales business. The reason behind the decision to quit are reports of bad practices at a Boohoo subcontractor’s factory in Leicester that found safety rules being violated and workers being paid less than the minimum wage. Revealed by The Guardian newspaper publication, these shortcomings, akin to modern slavery, were confirmed in September by an internal investigation proving that the managers had been aware of the situation (c.f. article No.12051). It should be noted that Boohoo is also one of the companies – along with Gap, H&M, Ikea and Nike – to have been asked by a UK parliamentary Committee investigating forced labor of Uyghurs in China to clarify their position. While reputational risk appears to be the reason prompting PwC’s departure, Boohoo has sought to minimize the event and while denying the resignation did confirm that ‘a process has recently commenced to tender for a new provider of audit services.’ Observers also note that consultancy firms are fleeing from scandals. Deloitte recently decided to cease auditing the petrol station giant, EG Group because of governance concerns. In 2019, Grant Thornton also backed down from working with the Sports Direct company because of tax investigations in Belgium.