Primark supply chain ethics second-to-none say analysts
Yesterday (1 March) ABF held its first-ever ESG investor day, a virtual
event hosted by CEO George Weston, with attendees including CFO John
Bason, the director of corporate responsibility, chief people officer,
and the company secretary, who formerly ran Primark's ethical supply
Primark's supply chain took centre stage during the event and notably,
management went into detail on the price-points of Primark's goods and
how they were able to keep them so low.
"Primark is often (mis)judged to have poor supply chain ethics, due to
its GBP4 price point, and has come under scrutiny from investors, consumers and politicians," points out Aneesha Sherman at
“Research suggests that supply chain ethics are a strength,
not a liability, for the retailer”
"The retailer is often subject to suspicion by both investors and consumers. The retailer has been in the ESG spotlight for
potential labour issues for many years and has been subject to several investigations on supplier labour conditions, including
multiple interviews by UK Members of Parliament, though all such inquiries have ended with favourable results and a clean bill of
"We find Primark's approach to be best-in-class," she says. "We have conducted detailed analysis on the economics of the business
model and the ability of Primark to make double-digit margins even with an industry-low average selling price. We have also compared Primark versus sector benchmarks, both on the business model and on the investments into supply chain monitoring and tracking. Finally, we have had multiple interviews with current and former executives in the Primark buying and supply chain
organisations. Our research suggests that supply chain ethics are a strength, not a liability, for the retailer. We find
Primark's approach to be more diligent and proactive than that of most apparel retailers."
Clive Black, analyst at Shore Capital, points out Primark has engaged with 80 organisations to work towards compliance on the
factory floor of Primark's supply chain.
"Accordingly, continual audits are undertaken, one thousand per annum, all of which are unannounced; each factory is inspected at
least once per year. Audit inspectors are looking for a wide range of issues from machinery and electrical risks, building
maintenance (fire exits) to fair pay through payroll checks and worker engagement," he adds.
He also notes the group's practice – post the Rana Plaza disaster in Bangladesh in 2013 – of prioritising building structural
integrity units apparel supply chain procedures with non-compliance leading to steps to assist with necessary change, and if not,
"Primark terminated any procurement from Xinjiang in China some time ago whilst it ceased its trading relations with the
Leicester factory base in the UK in 2014, not returning since. Pointedly, Primark also reported irregularities as it saw them to
the UK authorities at the time, quite a damning indictment of inept administration, noting the Boohoo crisis of 2020. Primark's
commentary also reflects poorly on the culture and values of Boohoo in our view," he adds.
A flaw in the system
Where Primark has fallen short though is on communicating its efforts.
Management has been slow to come out with clear messages to investors and consumers, much to the detriment of Primark, says Sherman, as it has allowed "myths and assumptions to dictate perceptions."
This is particularly true in Germany where Primark has experienced strong consumer backlash on ESG concerns, based mostly on the
low price point.
"We have long emphasised that Primark (and ABF overall) is strong on ESG but is not getting credit for the good work the company