On August 22 (Thursday), Chinese fast-fashion cross-border e-commerce giant Shein released its “2023 Sustainability and Social Impact Report.” The report revealed that two cases of underage labor were found in its suppliers last year, but did not provide specific details. Analysts believe that Shein’s proactive disclosure of the underage labor cases and commitment to strengthening audits of Chinese suppliers is an attempt to quell criticisms of its low-cost business model and prepare for a potential IPO.
According to Reuters on Friday (August 23), Shein stated in the report that the two cases had been “promptly resolved,” with remedial actions including terminating contracts of underage workers, arranging medical examinations, and assisting in returning them to parents or guardians when necessary.
Shein announced that it has suspended placing orders with suppliers employing children under the age of 16 until the suppliers strengthen their processes and verify workers’ identities before resuming procurement.
The report stated, “We will remain vigilant in the future to prevent such violations and will terminate any suppliers who do not comply with regulations.”
Shein’s CEO Sky Xu stated in the report, “To address labor and human rights risks, we have enhanced the standards under the Supplier Code of Conduct and SHEIN Responsible Sourcing (SRS) policy, and collaborated with third-party verification agencies to strengthen supplier audit programs to ensure compliance with our standards.”
Last year, Shein conducted 92% of audits through third-party organizations such as Bureau Veritas, Intertek, Openview, SGS, Tuv Rheinland, and QIMA. Shein aims for all audits to be completed by these organizations in the future.
The company has 5,800 contract manufacturers, with the majority located in Guangdong Province, China. Analysts suggest that Shein has intensified audits of Chinese manufacturers ahead of its planned IPO to alleviate pressure from the international community investigating its supply chain.
In a Reuters report in July 2023, it was mentioned that in 2020, Shein attempted to go public in the United States but shelved the plan. It has been collaborating with at least three investment banks on a potential initial public offering (IPO).
In August last year, Republican attorneys general from 16 states in the U.S. requested the Securities and Exchange Commission (SEC) to audit Shein’s supply chain before its potential IPO, investigating alleged instances of forced labor.
In February this year, Republican U.S. Senator Marco Rubio urged the SEC to prevent Shein from going public in New York unless it further discloses its operational status and “serious risks in conducting business in China.” He wrote a letter to SEC Chairman Gary Gensler, stating that although Shein is headquartered in Singapore, the company was founded in China. He also called for investigations into whether Shein’s supply chain involves the use of “Xinjiang cotton” in clothing production and the issue of forced Uyghur labor.
On April 16, Rubio wrote to U.S. Secretary of Homeland Security Alejandro Mayorkas, requesting an investigation into Shein and Chinese cross-border e-commerce platform Temu. If found to be in violation of existing laws, he urged adding them to the Entity List under the Uyghur Forced Labor Prevention Act (UFLPA).
Rubio stated, “Private companies and journalists have found compelling evidence that Shein and Temu are facilitating the entry of goods made from forced Uyghur labor…Given Shein and Temu’s frequent exploitation of trade loopholes, and these companies likely facilitating the importation of goods made from forced labor, I urge you to investigate these companies and add them to the (control) exporter list if they violate federal laws.”