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Fast fashion retailer Shein discovered two instances of child labour at its suppliers last year, according to its 2023 sustainability report. The company increased audits of its manufacturers in China to address criticisms of its low-cost business model in anticipation of a planned flotation.
Shein has halted business with suppliers found to be employing children under 16. The company will only resume sourcing from these suppliers after they have implemented stricter measures, including verifying the age of their workers.
The company has taken steps to rectify the situation, including ending the contracts of underage employees, ensuring their well-being, and facilitating their return home.
In response to the child labour incidents, Shein has revised its supplier policy to impose stricter penalties for severe violations, including immediate termination of the business relationship.
Prior to the policy change, Shein provided suppliers with a 30-day grace period to rectify any child labour violations. The company would terminate the business relationship if the issue still needed to be resolved within this timeframe.
Annabella Ng, Shein’s senior director of global government relations, stated that the company’s revised supply chain policy incorporates feedback from both regulators and suppliers.
The company had not previously disclosed the specific number of child labour cases, only reporting the percentage of audits identifying minors in the workplace. This violation was detected in 1.8% of supplier audits 2021, 0.3% in 2022, and 0.1% in 2023.
“We will continue to stay vigilant in preventing such violations and, as per our current policies, will terminate any non-compliant suppliers,” Shein stated in the report.
The fast fashion giant, known for its affordable fashion, has significantly increased the number of audits conducted on its suppliers. In 2023, the company conducted nearly 4,000 audits, compared to 2,800 in 2022 and just over 600 in 2021.
Shein has engaged reputable third-party auditing agencies, such as Bureau Veritas, Intertek, Openview, SGS, Tuv Rheinland, and QIMA, to conduct most supplier audits. The company aims to have all of its audits performed by these external agencies.
The company’s sustainability report reveals that severe breaches in its supply chain have declined.
Shein’s 2023 sustainability report, released after a significant delay, will be closely examined by potential investors as the company prepares for its initial public offering in London.
The company’s CEO Sky Xu has emphasised improving its supply chain governance and reducing its carbon footprint, particularly indirect emissions.
According to the report, Shein ships products directly from suppliers in China to customers by air, doubling its transportation-related emissions to 6.35 million tonnes of carbon dioxide equivalent in 2023.
Shein relies on a network of 5,800 contract manufacturers worldwide, with most of these suppliers located in Guangdong, China.
Shein has begun sourcing products from suppliers closer to its customers, such as Turkey and Brazil. This shift towards regional sourcing aims to reduce transportation emissions. The company has also reported a significant reduction in carbon emissions due to the switch from air and land freight to sea freight for transporting products from these regions.
In June 2024, Shein committed to reducing its greenhouse gas emissions by setting specific targets submitted to the SBTi for validation. The company is now awaiting approval for these targets.
The company has formed a sustainability committee at the board level to focus on environmental, social, and governance issues. The committee includes the CEO, executive chairman, and three investor representatives.
In addition, the senior director of global government relations, Annabella Ng, declined to comment on whether the company’s newly formed sustainability committee was established in anticipation of its upcoming initial public offering.
“However, we have certainly been focused on strengthening our governance structures as part of our broader ESG journey toward greater transparency and accountability,” she said.
As Shein grows, its ability to balance profitability with ethical and sustainable practices will be crucial. The company’s recent initiatives demonstrate a commitment to addressing these issues, but ongoing monitoring and transparency will be essential to maintain public trust.
