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Can Shein Go Green? Experts Dissect its First-Ever CSR Report

It peddles a seemingly endless assortment of ultra-trendy clothing and footwear at bottom-scraping prices. It’s been caught out selling toxic-chemical-laden merchandise and accused of promoting sweatshop-like conditions. Its meteoric success, based on a business model that undercuts and outlapped fast-fashion stalwarts like H&M and Zara, has run roughshod on the idea that younger consumers care about the impact of what they wear. Yet as Shein stares down a reported $100 billion valuation—more than its aforementioned rivals combined—the Chinese upstart is also angling to position itself as a force for social and environmental good.

Over the past year, the e-commerce giant formerly known as SheInside has joined the United Nations Global Compact and the Responsible Labor Initiative, though neither would comment about the specifics of its membership. In December, Shein hired an ESG chief and established a $10 million corporate social responsibility fund. At the end of February, TikTok’s most-namedropped brand published its first sustainability and social impact report. And on April 21, a.k.a. the day before Earth Day, the e-tailer signed a non-binding agreement with forestry nonprofit Canopy to eliminate ancient and endangered forests from its garments and packaging.

“At Shein, we understand that protecting our forests is essential to creating a better planet for future generations,” Adam Whinston, Shein’s global head of ESG, said in a statement. “Canopy has made important advancements in addressing the social and environmental concerns associated with man-made cellulosic fibers, and we are excited to join peer companies in the commitment to responsible viscose.”

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It’s unclear how much viscose Shein uses, though a spokesperson told Sourcing Journal that it was “notable’ and that the company expects to covert thousands of tons to preferred fibers by 2025. A search for the term on the e-tailer’s website, which features more than 600,000 products at any one time, pulled up more than 28,000 results.

Even so, it’s Shein’s unrelenting churn, its detractors say, that calls its professions of sustainability into question. Even its CSR report, said David Hachfeld, textiles expert at Swiss watchdog group Public Eye, is little more than a “farce” because it provides “no signal that it’s [moving away] from its business model of driving overconsumption” beyond scattershot efforts such as increasing the use of recycled polyester. What happens to returns is likewise a black box, he told Sourcing Journal.

‘Extreme speed and flexibility’

In terms of product launches, Shein has outpaced H&M by 6,584 percent, Zara by 4,259 percent and Boohoo by 1,385 percent since the start of the year, according to retail-analytics firm Edited.

“Not only does Shein have an immense product assortment, but its offering outprices its competitors across several core categories,” Kayla Marci, a retail analyst at Edited, wrote in a client note. “A Tweet even went viral stating $280 at Shein is equal to a year’s worth of outfits.” In its CSR report, Shein said its e-commerce-only tack not only reduces the need for overproduction but also avoids impacts stemming from lighting, flooring, plastic hangers and other physical-store trappings.

When Elizabeth Cline, director of advocacy and policy at fashion sustainability nonprofit Remake, ran Shein’s report through its reformulated accountability rating system, which awards points based on action, not promises, she downgraded the company from its original score of 5 to 0 out of a possible 150.

“In 2021, Shein got 5 points for having sufficient animal welfare policy only because they seemingly were not using any animal-based materials. Now [it’s] moved to using some down and wool, and it’s unclear if or how the workers and animals in those supply chains are protected,” Cline told Sourcing Journal. She described Shein’s report as “full of unsubstantiated claims and goals, a lack of demonstrable progress, and red herrings that draw attention away from the company’s main areas of impact, which is worker exploitation, carbon emissions and waste.”

While Shein noted that it has audited 700 of its production sites in 2021, it also indicates that 83 percent of them require corrective action, said Hachfeld, who co-authored a study on Shein’s workplace conditions in November. The CSR report doesn’t mention how many suppliers it uses in total or where they are based. Public Eye believes Shein employs roughly 1,000, most of them in the city of Guangzhou.

By its own account, 27 percent of its audited factories are ill-equipped for a potential fire. (The Public Eye report described barred windows, blocked stairways and no emergency exits at some of the facilities investigators visited.) Another 14 percent, Shein said, had violations regarding working hours. (Workers Public Eye spoke to worked 75 hours per week, with only one day off each month, in contravention of Chinese law.) Some 12 percent of the audited suppliers have been labeled as ZTV, or Zero Tolerance Violations, meaning immediate corrective action is required.

“From what we know, [Shein has] an expectation of extreme speed and flexibility,” Hachfeld said. “[It expects its] suppliers to be able to deliver products within a few days. And this, of course, is creating a lot of pressure, especially [with] working times.” In interviews with workers, Public Eye investigators found that piece rates were “extremely low,” meaning that the cost of Shein’s low sticker prices is being “passed onto workers,” another purchasing-practice red flag, he added.

As inflation continues to bear down, workers could end up even worse off than before, cautioned Neil Saunders, managing director of retail at GlobalData. “Shein is built on being ultra-low price and will be keen to maintain that position even in an inflationary environment,” he told Sourcing Journal. “Despite its enormous power, it does not have the ability to bypass inflation nor mitigate it through economies of scale—which are already extensive. There are therefore two solutions. First, it could raise prices marginally, taking a view that since everyone else in the market is increasing prices it would still retain its competitive position. Second, it could try and maintain its prices by squeezing suppliers and labor more and more.”

Shein said in its report that it requires ZTV and major violations to be remediated in 30 to 90 days depending on the severity and that failure to do so can result in termination.

The Amazon-dethroning app also said it aims to reduce violation rates every year through “on-site management and worker and capacity-building trainings.” But Hachfeld said that details on what Shein is doing to remedy problems are insufficient and that termination should only be a last resort. Simply jettisoning suppliers when “problems are too big” is “not a sustainable approach,” he said. He also pointed to a lack of information about logistics workers, who are also susceptible to exploitation and dangerous conditions.

Cline said that for Shein to protect its workforce and raise its Remake score, it needs to list at minimum its Tier 1 suppliers as a “bare-bones starting point” and publish full audits from a “credible and independent” third party that lists violations and wage data for every facility.

“Shein fails to understand that its ultra-fast fashion model is exactly what is putting [its] workforce at risk if [it doesn’t] put the systems in place to protect these women and men,” she said. “Instead [it says]…that [its] suppliers being responsive to supply [and] demand makes [it] better able to ‘maximize efficiency’ as if this is a positive. Maximum efficiency, the kind we see in fast-fashion factories, is often just another way to describe driving workers harder and longer.”

Shein’s work on the environmental side is equally vague, she said. Cline said that the company claims it’s sourcing wool and down from certified suppliers but does not reveal which certifications it’s using or how it’s tracing its raw material supply chain. Similarly, while the Gen Z darling said it’s setting wastewater-management targets and is counting carbon emissions, it offers no data.

“Shein is clear that [it plans] to borrow from the H&M playbook and put an emphasis on recycled materials and claim [its] fast-fashion business model is less wasteful because it’s clued into consumer demand,” she said.

Shein said it’s aware of the criticism. “We stand behind our report and recognize that there is work still to be done,” a spokesperson told Sourcing Journal. “Transparency within our industry is important and we are committed to increasing that over time, building from this report.”

‘Thinking more about sustainability’

Saunders isn’t surprised that Shein is trying to boost its ESG credentials, particularly if it’s eyeing an IPO as has been hotly anticipated, “as this is important for many investors.”

“It also needs to showcase its activities in this area as there is a risk that bodies like the EU will crack down on unsustainable fashion, which poses a risk to Shein,” Saunders said. “I think those are the main audiences for these initiatives. That said, it won’t hurt to show customers that they are thinking more about sustainability.”

Throwing its weight behind Canopy, he said, offers something else the e-commerce juggernaut can point to in terms of sustainability credentials. “It shows that [it is] ramping up [its] activities in terms of social and corporate responsibility,” Saunders said. “Some will say that it is a drop in the ocean compared to the environmental cost of Shein’s wider operations. There is some truth in this, but the fact Shein seems more alert to and willing to get involved with sustainable initiatives is a step in the right direction.”

Hachfeld said Shein’s CSR report reminds him of sustainability reports from a decade or more ago, when companies were “pulling out something very superficial, mainly a PR message with some key facts that you cannot prove or disprove.”

“Shein may come up with more sophisticated CSR reports in the future,” he said. “I’m actually expecting that, in the next years, we will see more details. So maybe it’s [the] first report, but actually, for a company of that size and with an experienced ESG head, it’s quite embarrassing that [it comes] out with such a weak paper.”

Shein declined an interview request with Whinston, who previously helmed sustainability and responsible sourcing departments at JCPenney and the Walt Disney Company. In a Q&A section in its CSR report, Whinston said the company plans to work with its partners to set science-based targets for greenhouse-gas emissions and waste reduction. It’s also poised to develop programs to reduce end-of-life waste, including “partnerships to make garment recycling more accessible,” he added.

“I hope that our stakeholders understand that this report is a first step toward engaging with our community transparently and on a regular basis,” Whinston said. “We will be sharing additional information as new initiatives are set in place and we measure the impact of our existing programs. Shein’s commitment to sustainability and social impact will be proven through actions, not statements. We appreciate calls for continuous, meaningful progress and look forward to sharing details about our work as they become available.”