We’ve covered a lot of recent litigation against companies resulting from a lack of supply chain due diligence or active human rights abuses. In the case of Chiquita, we saw private litigants win a judgment in a Florida court, an ongoing case in the UK against LMBA questioned the organization’s role in and liability for human rights abuses. New regulatory action in Italy is based on the government’s use of technology to detect labor violations. Now we’re seeing fashion company Boohoo facing a shareholder suit in the UK alleging that the company’s share price fell after a 2020 report from The Sunday Times exposed labor violations at its supplier’s factories in Leicester. City A.M. writes about the case stating:
“The claim argues investors who purchased shares in the years leading up to 2020 report suffered huge losses as a result of the share price drop. The investors allege that Boohoo made untrue or misleading statements and failed to disclose or delayed the disclosure of material about the matter to the market, breaching its obligations under the Financial Services and Markets Act 2000.“
We wrote about another investigation by UK’s Competition and Markets Authority (CMA) into the company’s sustainability claims in 2022 which doesn’t seem to be part of the lawsuit. These cases are perfect examples of how inadequate action in ESG can manifest multiple types of litigation risk – even outside the US. It seems that companies are now being held responsible for their suppliers’ actions more frequently, making supply chain due diligence more important than ever. As this case shows, human rights violations in supply chains can have a ripple effect even into capital markets, impacting a company for years after disclosures – especially if evidence indicates those disclosure were less than truthful.
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