Shein discloses instances of child labor within its supplier network.
Last year, fast fashion retailer Shein discovered two instances of underage labor at its supplier factories. They revealed this information in their 2023 sustainability report, as they aimed to strengthen their oversight of Chinese manufacturers to counter criticism of their low-cost business model, which was supposed to go public.
In the aforementioned report, Shein declared that they had halted orders from the guilty factories until they had reinforced their protocols, including verifying workers' identity documents. They resumed business with these factories after they had implemented these measures.
Shein claimed that both situations were swiftly resolved, with corrective actions including terminating the underaged workers' contracts, arranging medical check-ups, and facilitating their return to their parents or guardians if necessary.
Following these incidents, Shein revised their supplier policy last October, stipulating that severe violations (dubbed "Immediate Termination Violations") would promptly result in terminating the supplier relationship. Previous policy allowed up to 30 days for suppliers to rectify the issue, or face severance.
Annabella Ng, Shein's senior director of global government relations in Singapore, commented that the updated supply chain policy was adapted from regulator and supplier feedback. Shein had not previously reported the number of child labor cases, only disclosing the proportion of audits revealing child labor. This violation was detected in 1.8% of audits in 2021, 0.3% in 2022, and 0.1% in 2023.
Shein pledged to steadfastly combat such violations in the future, vowing to terminate non-compliant suppliers. In 2023, Shein conducted 3,990 audits, a significant increase from 2,812 in 2022 and 664 in 2021.
Nearly all (92%) of their audits were conducted by Bureau Veritas, Intertek, Openview, SGS, Tuv Rheinland, and QIMA, and Shein aims to ultimately conduct all audits through such third-party agencies.
The published audit results showed fewer severe violations compared to the previous year.
Emission surge
Shein's 2023 sustainability report, released more than a year after the 2022 report, will be scrutinized by investors considering whether to purchase shares in the company when it goes public. Shein filed for an initial public offering in London in early June.
In the report's introduction, Shein CEO Sky Xu highlighted the importance of enhancing Shein's supply chain governance and managing its carbon footprint, focusing particularly on indirect "scope 3" emissions.
Shein transports goods directly from Chinese suppliers to clients by air, and their emissions from transporting goods almost doubled in 2023 to 6.35 million tonnes of carbon dioxide equivalent, the report revealed.
Shein has a total of 5,800 contract manufacturers, with most located in China's Guangdong province. The company has begun sourcing some products from suppliers closer to its consumers, in Turkey and Brazil, claiming that this will help reduce transport emissions. Shein reported saving 49,578 tonnes of CO2 equivalent in 2023 by switching from air to sea and land freight to transport these products.
Shein presented their emissions reduction objectives in June of this year to the Science-Based Targets Initiative, the leading global arbiter of how companies set climate targets, and is undergoing the validation process.
Shein established a board-level sustainability committee in July 2022, comprising their CEO, executive chairman, and three investor representatives: HongShan partner Jiajia Zou, Global Head of ESG at General Atlantic Cornelia Gomez, and Brookfield Growth Managing Partner Josh Raffaelli.
Ng declined to comment on whether Shein created the committee to boost its governance in anticipation of the IPO, stating that she could not address IPO-related queries.
"However, we have been focusing on improving our governance structures as part of our broader ESG journey towards greater transparency and accountability," Ng said.
Shein's commitment to addressing their low-cost business model criticism led them to strengthen their oversight of Chinese manufacturers, aiming to minimize the occurrence of issues like underage labor in their supply chain. Due to two such instances, they halted business with the guilty factories and only resumed once corrective actions were implemented.
Shein's focus on reinforcing their supply chain leadership is evident in their recent increase in audits, conducted primarily by third-party agencies, aiming to reduce severe violations and their carbon footprint.
