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Shein’s IPO: Cashing in on High-Risk Supply Chains in the Name of Ultra-Fast Fashion
Áine Clarke and Rosie Monaghan
6 min read
The much-anticipated IPO of ultra-fast fashion company Shein, the largest online fashion retailer in the world, on the London Stock Exchange has caught the attention of investors globally. In less than two decades Shein’s founder, the famously private Chinese billionaire Chris Xu, has grown the business from a modest e-commerce website to an international retail giant, now occupying around one fifth of the global fast fashion market and valued at $66 billion.
Powered by AI technologies and machine learning, fashion brands like Shein are producing at unprecedented scale and speed. From November 2022 to November 2023, Shein reportedly introduced 37 times more products than Inditex brand Zara, and 65 times more the production of H&M. Shein’s success signals a shift in global retail models which investors and regulators alike will need to come to grips with. E-commerce platform Temu, tagged as “Amazon on steroids”, reportedly dispatches approximately 4,000 tons of product on a daily basis. Amazon itself is now seeking to take on ultra-fast rivals and their cheap products by introducing a new outlet, “Haul”, which will cap the price of products on sale at $20.
As these ultra-fast fashion brands flood the market with ultra-cheap products, investors should be asking: are the human and environmental costs worth the risk?
To achieve this rate and scale of production, ultra-fast fashion business models rely on extractive and polluting modes of over-production. For example; Shein’s use of virgin polyester and oil reportedly produces the same amount of CO2 as around 180 coal-fired power plants. Aggressively low prices, rapid turnaround times, and unpredictable production schedules can put substantial financial strain on suppliers. The knock on effect is magnified human rights risks—including forced labor—for workers.
Ahead of Shein’s London IPO, expected in early 2025, the Business and Human Rights Resource Centre’s KnowTheChain benchmark has assessed the company using its standard benchmark methodology on corporate efforts to address forced labor risks in global supply chains. Our analysis finds, while the company has put in place some basic policies and processes, robust commitment to human rights due diligence—and therefore vital labour protections—are missing.
This can only mean one thing: real and growing risk for the already-vulnerable workers in its supply chain.
Out of step with high-street fast fashion retailers like Adidas, Asos, H&M and Primark, Shein also provides little transparency over its supply chains. While more than half (52%) of KnowTheChain’s benchmarked apparel and footwear companies disclose first-tier supplier lists, including supplier names and addresses, Shein discloses those lists for neither first nor lower tiers. While it discloses some countries from which it sources cotton, it does not disclose a full list of sourcing countries for any high-risk raw materials used in its products.
This lack of transparency from a company with a reported 6,000 Chinese suppliers should be a concern for investors. This poses barriers to being able to “identify and assess” risks, in line with human rights due diligence standards and sanction regimes like the Uyghur Forced Labour Prevention Act (UFLPA). The identification of Uyghur cotton in Shein’s supply chains in 2022 made this abundantly clear. The allegation increased regulatory scrutiny and reputational risks, delaying its listing on the New York Stock Exchange. Speculation is increasing as to whether the UK will face the same fate, as NGO pressure continues unabated and the UK’s Anti-Slavery Commissioner also raises concerns about the IPO due to allegations regarding labor practices.
Shein’s public disclosures also demonstrate a critical lack of information on how it is assessing human rights risks—including disclosing identified high-risk materials, processes, groups of workers, or locations. Shockingly, Shein has not identified and disclosed any forced labor risks in its supply chains, despite operating in a sector highly likely to pose these risks to workers.
In contrast, 54 percent of apparel companies benchmarked by KnowTheChain in 2023 disclosed how they conduct a human rights risk assessment on their supply chains. Shein relies heavily on social audits to identify forced labor risks and other labor non-compliances. However, social audits routinely fail to detect human rights issues, due to flawed methodologies and wider industry opacity and incentive structures.
Heightened risks associated with Shein’s business model require a robust management approach, and the adoption of operational practices that would enable workers to play a central role in the design, implementation and monitoring of key due diligence processes. However, absent from Shein’s demonstrated approach is any evidence of engaging with key stakeholders and rightsholders: including workers, worker representatives, or expert civil society organizations who can provide critical knowledge of working conditions, and forced labor risks, in the company’s supply chains.
This approach is misaligned with key norms like the UN Guiding Principles on Business and Human Rights and the EU’s corporate sustainability due diligence directive (CSDDD), which require meaningful engagement with stakeholders at each stage of the due diligence process. Failure to follow these rules could lead to serious legal and ethical risks for Shein.
Shein relies on small-batch testing of products, a method also used on a smaller scale by Boohoo. It produces approximately 50 to 100 items per day before scaling up production once an item becomes popular. Brand purchasing practices can put workers’ rights at risk by putting pressure on supplier factories to meet unreasonable production demands at short notice. Low profit margins for Shein suppliers, and resulting links to low wages and increased overtime for workers, have been highlighted by Globalworks.
In sum, these business models are at odds with developments in mandatory human rights and environmental due diligence legislation. The UK should keep apace with Europe and the US, strictly regulating the import of goods produced using forced labor, and mandating corporate human rights due diligence, lest it become a “dumping ground” for products and practices tainted by labor rights abuses. Stock exchange listing rules globally must stress the importance of human and labor rights standards.
Over the past eight years of benchmarking, KnowTheChain data has shown that corporate progress on addressing forced labor risks in supply chains is glacial, and requires regulation to compel action. In an era where technological advances are, once again, deployed to circumvent worker collective power; regulators and investors must use their power to prevent backsliding on progress. They must prioritise the human rights of workers making the world’s products, and in Shein’s case, the clothes we wear.
Áine Clarke is the head of KnowTheChain, and Rosie Monaghan is KnowTheChain senior researcher, at the Business & Human Rights Resource Centre.
For more information on KnowTheChain’s findings, including Shein’s responses and detailed engagement questions for investors to use with ultra-fast-fashion companies, please see KnowTheChain’s investor brief.
