Shady Shein: Will opacity eventually cost fashion behemoth Shein?

May 2, 2022

3 min read

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What's going on here?

One of the biggest players in fast fashion, Chinese online retailer Shein, has captured the loyalty and bank accounts of Gen Z shoppers in the UK, yet its supply chain operations remain mysteriously opaque.

What does this mean?

At a time where fast-fashion brands are under increasing pressure from sustainable fashion activists to open up about their supply chains, Shein’s alarming lack of transparency places it under the continual scrutiny of shoppers. For a company selling jewellery from 50p, tops from £1.50 and even wedding dresses from £30, Shein has much to answer for regarding how and where it is able to produce the 6,000 new garments per day which are added to their website, and under which conditions.

The UK’s Modern Slavery Act 2015 (MSA) requires businesses with an annual turnover of £36 million that provide goods or services in the UK to publish an annual slavery and human trafficking statement. This should detail what, if anything, the business has done to mitigate and respond to risks of modern slavery within their own organisation and supply chains. This soft law provision has been criticised because it enables companies to merely disclose they have done nothing to combat modern slavery and still be compliant with the law. Corporate transparency, therefore, hinges on the voluntary goodwill of senior executives being committed to meeting the ethical standard.

What's the big picture effect?

While privately-owned Shein publishes no financial data, its annual revenue is estimated to be around $5 billion, meaning it is caught by the MSA. Shein produced a modern slavery statement in October 2021 after being called out publicly for flouting the reporting requirements of the MSA. Shein’s statement offers a Code of Conduct detailing 12 standards which it claims all its suppliers and manufacturers must adhere to. Furthermore, on the “Corporate Social Responsibility” (CSR) section of its website, Shein states it has “industry leading working conditions” with “state-of-the-art factories and offices”. The website also claims Shein provides “above average salaries and benefits” including “health insurance, yearly bonuses and investment plans”.

However, Shein’s own 2021 Sustainability and Social Impact Report brings the effectiveness of its Code of Conduct and the bold CSR statements on their website into question. According to this report, 66% of Shein’s factories and warehouses fall into the “mediocre” performance category, meaning there are between one and three major risks and “corrective action is required”. 12% of factories are deemed “very poor” with major violations which, if not corrected, could cause termination of the facility. The top major violations reported at these factories include fire and emergency preparedness, working hours and recruitment compliance. The report contains no detail on employees’ wages and rights.

Some of Shein’s major rivals put its modern slavery statement to shame. H&M has published a spreadsheet with names and addresses of thousands of its factories and processing facilities on its website. Similarly, Zara’s parent company Inditex has an eight-page code of conduct and a map showing the number of its factories and suppliers in each country, highlighting the minimalism of Shein’s mere one-page code.

The MSA aims to create a “race to the top” between businesses. With consumers, particularly those in Gen-Z, becoming more concerned with issues of social justice and moving towards more sustainable purchases, Shein could find their discounts and low prices are not enough to retain even the most trend-conscious shoppers’ attention, forcing a response. However, the soft law nature of the MSA coupled with the fact that since the passing of the Act, not a single injunction or administrative penalty has been applied to a company for non-compliance, is likely to allow Shein’s supply chains to remain a mystery. Without the provisions of the MSA becoming hard law with serious legal penalties given to companies that fail to produce detailed reports, it is expected insights into the supply chains of leading brands and retailers such as Shein will remain translucent at best.

Report written by Lucy Reynolds 

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