Shein reveals two cases of child labor in its suppliers

London. Fast-fashion retailer Shein found two instances of child labor at its suppliers last year, it said in its 2023 sustainability report, as it stepped up audits of manufacturers in China to quell criticism of its low-cost business model ahead of a planned IPO.

In Thursday’s report, Shein said it had suspended orders from suppliers that had employed minors under 16 and would only resume sourcing from them when they had strengthened their processes, including checking workers’ IDs.

The company said both cases had been “resolved quickly” with remedial measures including terminating the contracts of underage employees, arranging medical check-ups and facilitating their return to parents or guardians if necessary.

Shein tightened its supplier policy in October after the child labor cases were discovered, so that any serious violations — dubbed “Immediate Termination Violations” — would result in an immediate termination of the supplier relationship.

Previously, suppliers employing minors were given 30 days to resolve the issue, after which Shein would cut ties if solutions were not implemented.

Annabella Ng, Shein’s director of global government relations in Singapore, said the updated supply chain policy took into account feedback from regulators and suppliers.

The company had previously not reported the number of child labor cases, citing only the percentage of audits in which minors were found in the workplace. Such a violation was found in 1.8% of supplier audits in 2021, 0.3% of audits in 2022, and 0.1% in 2023.

“We remain vigilant to protect against such violations in the future, and in line with current policies, we will terminate any supplier that fails to comply,” Shein said in the report.

Shein, which has grown rapidly by selling $5 tops and $10 dresses online to shoppers around the world, said it conducted 3,990 audits in 2023, up from 2,812 in 2022 and 664 in 2021.

It used Bureau Veritas, Intertek, Openview, SGS, Tuv Rheinland and QIMA for 92% of its audits last year, and said it aims to have 100% of audits conducted by such third-party agencies.

Overall, audit results released by Shein show fewer serious violations than last year.

Increase in emissions

The report will be closely scrutinised by investors weighing up whether to buy shares in the retailer when it goes public. The group filed for an initial public offering in London in early June.

In an introductory note, Shein Chief Executive Sky Xu said improving Shein’s supply chain governance and managing its carbon footprint, particularly indirect “scope 3” emissions, were “critical” areas for the company.

Shein ships products directly from suppliers in China to customers by air, and its emissions from transporting products more than doubled in 2023 to 6.35 million tons of carbon dioxide equivalent, according to the report.

The company has a total of 5,800 contract manufacturers, most of them in China’s Guangdong province.

It has started sourcing some products from suppliers closer to its customers, in Turkey and Brazil, which it says will help it reduce transport emissions. Last year it saved 49,578 tonnes of CO2 equivalent by switching from air to sea and land transport.

In June this year, Shein submitted its emissions reduction targets to the Science-Based Targets Initiative, the world’s leading arbiter of corporate climate target setting, and is currently in the validation process.

Asked whether Shein had set up the committee to strengthen its governance ahead of the upcoming IPO, Ng said she could not comment on any matters related to the IPO.

“But we have certainly been looking at improving our governance structures as part of our overall ESG journey towards greater transparency and accountability,” he said.