Supply Chain Issues Revealed
Shein, the online fashion giant, has acknowledged discovering two cases of child labor and instances of minimum wage violations within its supply chain last year. This admission, part of the company’s 2023 sustainability report, comes as Shein seeks support for a potential £50bn flotation on the London Stock Exchange.
Industry Concerns and Campaigners’ Opposition
The disclosure follows pressure from workers’ rights campaigners urging the UK government to block Shein’s listing due to concerns about the company’s supply chain transparency and ethical practices. The British Fashion Council (BFC) has also expressed significant concerns regarding the proposed listing, which could be announced as soon as next month.
Earlier this year, an investigation by Public Eye, a Swiss-based non-profit organization, revealed that Shein’s garment workers often endure more than 70-hour work weeks. Allegations of forced labor in China’s Uyghur region and a pattern of design appropriation, leading to multiple lawsuits, further tarnished the company’s reputation.
Previous Setbacks and Compliance Measures
Shein’s initial plans to list in New York were derailed after US lawmakers raised alarms over labor malpractice allegations and legal disputes with competitors. While no formal opposition has emerged in the UK, Shein reportedly filed for a London Stock Exchange listing in June and secured backing from the Labour Party before the July election.
Headquartered in Singapore but originally founded in China, Shein stated that it tightened its supplier policies in October last year. The new regulations mandate that any instances of child or forced labor result in immediate contract termination.
Remediation and Ongoing Challenges
Annabella Ng, Shein’s senior director of global government relations, explained that the updated supply chain policy was informed by feedback from regulators and suppliers. Shein temporarily suspended orders from the Chinese suppliers involved in the child labor cases, giving them 30 days to address the issues. Business resumed only after the suppliers implemented measures to end the practice.
Shein’s report highlighted that both child labor cases were swiftly resolved, with steps taken to terminate contracts with underage workers, ensure outstanding wages were paid, arrange medical checkups, and facilitate the return of affected children to their families.
Additionally, the report revealed that 0.5% of the suppliers audited by an independent partner in China failed to pay the local minimum wage or delayed wage payments. Shein claims that these violations were addressed promptly.
Looking Ahead to a Possible IPO
As Shein prepares for a potential £50bn float on the London Stock Exchange, the company is believed to be finalizing a prospectus for approval by the Financial Conduct Authority. Plans may include offering shares to its customers, a strategy previously employed by Deliveroo in its 2021 initial public offering, which faced significant challenges.
