Fast fashion retailer Shein disclosed in its 2023 sustainability report that it had found two cases of child labor at its suppliers in the previous year. The company took swift action, suspending orders from these suppliers and only resuming sourcing from them after they had strengthened their processes and remedied the situation. Remediation steps included ending contracts for underage employees, arranging medical checkups, and repatriating them to their parents or guardians. Shein updated its supplier policy to include immediate termination for severe breaches, such as child labor violations, after previously allowing suppliers 30 days to resolve issues.
In response to feedback from regulators and suppliers, Shein’s senior director of global government relations in Singapore, Annabella Ng, stated that the updated supply chain policy aimed to address concerns and prevent future violations. The company had previously only reported the percentage of supplier audits that found minors in the workplace, which decreased from 1.8% in 2021 to 0.1% in 2023. Shein reiterated its commitment to vigilance against violations and stated that noncompliant suppliers would be terminated in accordance with its policies. The number of audits conducted by Shein increased significantly over the years, indicating a stronger focus on supplier compliance and monitoring.
Shein’s 2023 sustainability report, released more than a year after the 2022 report, will be crucial for investors considering purchasing shares in the company, especially with its planned initial public offering in London. CEO Sky Xu emphasized the importance of improving supply chain governance and managing carbon emissions, particularly indirect scope 3 emissions from transporting products. The company’s carbon emissions from product transportation more than doubled in 2023, prompting initiatives to reduce emissions, such as sourcing products from suppliers closer to consumers in Turkey and Brazil. Shein reported goals for emissions reduction to the Science-Based Targets Initiative and disclosed the establishment of a board-level sustainability committee to enhance transparency and accountability.
Shein’s sustainability efforts also include partnerships with third-party agencies for supplier audits, with the aim of conducting all audits through such agencies. The audit results published in the report showed fewer serious violations compared to the previous year, indicating progress in monitoring and enforcing compliance within its supply chain. The company’s commitment to sustainability and governance, as evidenced by the creation of a sustainability committee at the board level, aligns with industry standards and expectations for responsible business practices. Shein’s emphasis on improving its carbon footprint and reducing emissions reflects a broader awareness of environmental sustainability concerns in the fashion industry.
Shein’s response to the child labor cases and its efforts to strengthen supplier policies demonstrate a proactive approach to addressing ethical concerns and ensuring compliance within its supply chain. The company’s public disclosure of audit findings and sustainability initiatives reflects a commitment to transparency and accountability, which may influence investor perceptions and decisions regarding its planned IPO. By establishing clear goals for emissions reduction and engaging with global initiatives on climate targets, Shein is positioning itself as a responsible and sustainable fashion retailer, seeking to balance its rapid growth with environmental and social considerations. As the company moves forward with its IPO plans, its sustainability practices and governance structures will likely continue to be scrutinized by stakeholders and investors alike.
