Will Worker Factory Conditions Foil Shein’s UK IPO?
Vicki M. Young
5 min read
Shein’s IPO troubles aren’t going away.
The Chinese fast-fashion firm has been eyeing the U.K. as an option to float its shares following regulatory roadblocks in the U.S. However, now that’s running into multiple hurdles, including a call for greater scrutiny over disclosures on supply chain and factory worker conditions. And if regulatory concerns reach the same level of obstacles as in the U.S., that could leave possibly Hong Kong and Singapore, where Shein is now based, as its only IPO options.
Word surfaced in February that U.K. Chancelor Jeremy Hunt had met with Shein chairman David Tang to persuade him to consider a London initial public offering instead of New York. But that was then. Now, Hunt isfighting for his seat in the upcoming U.K. elections on July 4 and some British politicians believe a Shein IPO should be placed on pause until after the general election.
A spokeswoman for Shein said the company declines to comment “on anything related to a potential IPO.”
Following a meteoric rise on e-commerce leaderboards, the previously unknown Chinese e-tailer surfaced on U.K.’s regulatory radar in August 2021 for failing to make required public disclosures about working conditions along its supply chain. U.K.’s Modern Slavery Law requires businesses with annual global revenue above a set threshold to list on their websites the steps taken to fight forced labor in their supply chains.
“As a global company serving customers across more than 150 countries, we believe it is healthy to attract scrutiny and transparency and we want to be held to the highest standards,” the Shein spokeswoman said on Monday. “Our Modern Slavery Statement is published and publicly available on our U.K. website, as required by U.K. law.”
It comes as little surprise that U.K. politicians want to take a closer look at Shein’s operations. U.S. politicians voiced concerns last year, putting stumbling blocks in front of the Forever 21 stakeholder’s U.S. IPO hopes.
Nearly two dozen members—Democrats and Republicans—of the U.S. House of Representatives on April 28, 2023, urged the Securities and Exchange Commission to hold off registering the fast-fashion firm until it can be independently certified that the company doesn’t use forced labor from China’s persecuted Uyghur minority.
“We strongly believe that the ability to issue and trade securities on our domestic exchanges is a privilege, and that foreign companies wishing to do so must uphold a demonstrated commitment to human rights across the globe,” they wrote in a letter addressed to SEC chair Gary Gensler.
Shein has said that the company doesn’t have suppliers in the Xinjiang region and it told Sourcing Journal previously that its suppliers must adhere to a strict code of conduct “aligned to the International Labour Organization’s core conventions.”
But concerns over forced labor aren’t Shein’s only problem. American politicians also have concerns over whether the U.S. de minimis loophole, which exempts from tariffs any shipment less than $800 in value, would allow the e-commerce juggernaut to circumvent scrutiny from the Department of Homeland Security or Customer and Border Protection. And in the past year, there’s been growing concern over fast fashion’s contribution to global waste, not to mention how its throwaway apparel pollutes the planet.
Perhaps more damning is a report from Swiss watchdog group Public Eye earlier this month, where textiles expert David Hachfield said there were few signs that Shein has improved its Chinese supply chain two years after it found widespread evidence of excessive overtime, poverty wages and unsafe conditions at the e-tail Goliath’s Chinese suppliers, often in violation of local labor requirements.
In the latest report, Public Eye found that workers still reported an average 12-hour workday, minus lunch and dinner breaks, six or seven times a week. The factories flouted Shein’s stipulation that employees must work less than 60 hours a week, and investigators encountered workers lighting up cigarettes in stairwells at the entrances of fabric warehouses, creating a fire risk. Wages were similar to the 2021 report, with earnings between 6,000 an 10,000 yuan ($800 and $1,382) per month, depending on the number of pieces produced. Public Eye’s report suggests that Shein failed to follow up on promises that it would investigate the Swiss watchdog’s 2021 findings.
Also, earlier this month, Shein signed a cease-and-desist agreement with the Federation of German Consumer Organizations (vzbv) after it lodged a complaint in April that the Chinese firm violated a regulation under the EU Digital Services Act. The European Union last month added Shein to its Very Large Online Platform list, a compilation of digital firms are under stricter safety rules. Allegations included manipulative designs and hidden contact options, according to an Instagram post from the vzbz, as well as concerns over “random” discounts, greenwashing and “missing information” in ratings. A Shein representative said the company would work to update pieces of the company’s site, but did not elaborate further on the changes.
Adding to Shein’s troubles, the government of South Korea’s capital city Seoul said on Tuesday that some products sold on Shein’s site contained toxic chemicals in amounts substantially above acceptable levels. The items on the shopping giant’s site include children’s shoes, leather bags and a belt. According to the city government, the shoes contained 428 times the permitted level of phthalates, while the amounts in three handbags were as high as 153 times the limit. Of the 93 items inspected by the Seoul government thus far, almost half—including children’s watches and coloring pencils—also contained toxic chemicals, the Seoul government said. Shein’s policy is to remove offending products from its sites once it is informed of any claim.
