Jaleesa King doesn't think the Chinese fast-fashion giant's clothes will last longer than it takes to post a good photo on social media. She spends as much as $500 a month on about 20 to 30 clothing items she won't wear. She laughingly says, "Maybe just once or twice, that's all." I will definitely take a good picture.
Shein has become the face of fast fashion and one of the world's top startup. As environmental, social, and governance issues become more important to investors, the retailer's promotion of disposable fashion may evolve into the biggest threat to its continued success. A vast network of contract manufacturers allows Shein to pump out thousands of youth-friendly styles daily at barely believable prices.
With sales of at least $16 billion in 2021, up from $10 billion in 2020, and a valuation of about $100 billion, the company has catapulted into the same league as Musk and ByteDance. Tiger Global Management is one of the investors to date. Shein's business model is the source of a potentially toxic image problem that has sparked allegations of environmental damage and worker exploitation. New plans at Indiana University have been put on hold due to concerns about the company. The people and institutions with real power over Shein's future have little choice but to pay attention.
According to people familiar with the company's thinking, Shein told existing investors that it would like to have an initial public offering in the US as soon as possible. A team of new executives is trying to change the company's image as it tries to justify its high valuation.
People familiar with the matter, who didn't want to be named, said the current drive to improve Shein's performance reflects its preparations for a possible listing. The company wants to minimize the risk of its policies being in the way of a successful IPO, people say.
Shein's competitors face some of the same criticisms. The number of new garments produced had doubled compared to the 50 billion made in 2000. Western apparel giants have made efforts to clean up their image through recycling drives and other initiatives. Shein may need to make a similar change in order to survive.
The data is compiled byBloomberg.
The Chinese roots of the retailer are something that can't be changed. At a time when the US-China relationship is becoming more difficult, extra scrutiny is brought to right or wrong. The issue of forced labor in the region that produces 85% of China's cotton is raised in the fashion world. Shein doesn't use any of the factories in that region. The company uses a lot of suppliers.
Money managers in the US are placing more pressure on companies. In the most recent season of shareholder meetings, environmental and social resolutions received 32% of the vote, up from 22% five years ago. The directors of companies that don't act on issues such as climate change will be voted against by the funds. Jenny Davis-Peccoud is the global head of sustainable at Bain & Co. An investor can end up on the wrong side of things.
Shein is accused of a lot of things. Some goods sold by Shein are said to be made by low-paid workers with long working hours and dangerous workplace conditions, while others are said to be so wasteful that no one cares about the environment. According to Garik Himebaugh, founder of Eco-Stylist, a social enterprise group that scores companies on their commitment to sustainable practices, shein is a red flag. Shein was given zero points out of a possible 100. They got about 30 points. Shein was the only major brand to get a zero score.
Shein has had to contend with accusations of theft of copyrighted works. At least 40 US lawsuits have been filed against the company since the beginning of the year. It is more than three times as many as H&M, and more than twice as many as Urban Outfitter. Shein's suppliers certify that they don't violate third party intellectual property.
Shein last year added executives, most notably Adam Whinston, who became the new global head of ESG. Reframing Shein as a green champion is one of the goals.
Introducing thousands of new items a day is a feature of the company's sustainable model. He told a conference in June that the retailer waited to see how consumers responded before ramping up production. He believes Shein is a role model for other manufacturers. He said at the conference that the model would result in 20% less production. An innovative and unique business model approach that has enabled us to be a more sustainable company has been part of this approach.
The associate professor and research director at the Institute for sustainable futures thinks differently. She says that a lot of production of clothing is not meant to last a long time. The European Commission is in the same boat. New production standards, design requirements to make clothes last longer, and mandatory minimums for the inclusion of recycled fibers were introduced in March.
Shein's labor policies are being scrutinized. Some manufacturers supplying Shein's products were found to have dangerous workplace conditions and 75-hour workweeks.
The controversy over Xinjiang cotton is much larger than these issues. Concerns over forced labor prompted companies such as H&M and Nike to boycott the material, and products from the remote Chinese region are now banned from the US unless the importer can prove they were made without forced labor. Thanks to a loophole in US trade law that allows companies to ship up to $800 of goods duty free from foreign nations directly to consumers in the US, Shein has not run afoul of the sanctions. Shein products can be purchased online and shipped directly to customers, making them eligible for the exemption.
The company says it won't tolerate child or prison labor or underpayment of workers. Implementing these policies may be difficult if Shein doesn't pay its suppliers more to comply.
Many apparel producers are struggling to survive due to fiercer competition and weaker demand. The owners and workers of the factories don't have strong incentives to raise their Esg credentials. They need to keep the job and keep more money.
Shein uses third-party firms to audit its suppliers' facilities. The company takes corrective action when violations are found.
Shein has a third-party business model that contributes to the brand's copyright troubles. Many artists and designers have filed lawsuits against Shein this year. Shein is accused of copying an artwork of a woman with long black hair and a Picasso-esque nose, selling prints for as little as $4. Shein has been accused of abuse by her attorneys at Holland & Knight of blaming third-party vendors for intellectual property violations.
According to the court complaint, Shein has willfully violated the rights and interests of independent artists. She is seeking a lot of money. Sara M. Lyons, a fashion designer in southern California, says she's heard about it a lot. It doesn't affect their bottom line enough to care
Shein takes all claims of violation seriously, according to Whinston. He said in an email that it was not their business model to do so. Suppliers have to certify that their products do not violate third-party intellectual property.
Shein requires suppliers to follow a code of conduct and be monitored. When violations are detected, we need to fix them. If severe violations aren't fixed immediately, that can lead to being barred from being a supplier to Shein
Shein X, a program that showcases independent designers' work to its enormous customer base, was launched last year. While we handle the manufacturing, marketing, and selling, shein X allows designers to do what they do best.
A fund for nonprofits supporting underserved communities and other causes is one of the initiatives the company launched over the past year. About 1,100 jobs will be created by the opening of a distribution center by Shein.
While the school looks at Shein, the IU partnership has stopped. George Vlahakis, associate director for communications and media relations at the business school, said that a thorough review of the company, its practices, and responses to the concerns raised have been launched. Appropriate actions and responses will be taken once this review is completed. New initiatives will be put on hold in order to conduct a fact-based review.
The engagement with IU has given Shein valuable information about future academic partnerships in Indiana. Shein will evaluate any new engagements with IU.
Critics have not been silenced by Shein's announcements. The company paid lip service to sustainable practices after donating 15 million dollars to the Or Foundation, a charity that helps textile waste workers in West Africa. This is nothing more than a greenwashing stunt without any drastic change to its ultra-fast- fashion model.
More action is promised by the man. He said in his email that Shein would try to move more of its products by ship. The company wants to use more recycled fibers. There will be a new set of goals soon. He said that they would be aggressive and difficult to achieve. They won't satisfy skeptics who say fast fashion's real problem is the overconsumption of cheap clothes on a massive scale.
Customers of Shein seem to have no interest in this. For some investors, the brand's potential for growth will make up for its reputation problems. More investors are questioning what constitutes sustainable investing, and how much good it actually does, as the ESG movement has hit its own speed bumps recently. For institutions in particular, sustainable practices are likely to become more important. "I don't think it's possible for fast fashion or ultrafast fashion to ever be sustainable." The labor standards and the environmental standards are what keep the machine running.
The African charity accepting millions of dollars is wary about being associated too closely with the company. Shein's business model encouraged overconsumption, according to Director Liz Ricketts.
The foundation isn't on Team Shein. She said that the agreement was a transfer of money. It is not a partnership. She credits the company with taking some responsibility for its role in the crisis. She went on to work with him after he heard his stance. It is the first time that any brand has done that. The corporate bottom line is the focus of the ratings.
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