In its most recent sustainability report, Shein revealed that its audits discovered two instances involving child labor in its supply chain in 2023. In its report, the China-founded, Singapore-based ultra-fast fashion behemoth said it “swiftly resolved” both cases by temporarily suspending orders from the suppliers at issue and launching an investigation that led to “remediation steps” like terminating contracts with underage employees, ensuring the payment of outstanding wages, and arranging medical checkups as needed.
The two cases, which the company said in its report were uncovered by Shein Responsible Sourcing (“SRS”) audits that took place during the first three quarters of 2023, also led to Shein ensuring that suppliers “strengthened their processes for screening new hires” by maintaining appropriate records. “Following appropriate remediation, the contract manufacturers were permitted to resume business,” the company stated in its report, noting that in the fourth quarter it did not find any cases of child labor. (Shein defines child labor as “any person under the age of 15, under the age of completion of compulsory education or under the minimum age for employment in the country/region, whichever is the highest.”)
Shein also stated that starting in October 2023, it vowed to apply “a firmer stance against severe violations” that future audits might identify. Before October, which is when the two child labor cases in question were discovered, the company’s approach was to immediately suspend orders from the supplier(s) and give them 30 days for remediation. After October, when the company strengthened its policy, it said that it would terminate the business relationships at issue altogether.
At the same time, Shein claims that it requires all new suppliers to submit to an SRS audit assessment and subjects all existing suppliers to an annual audit. “Nearly all” SRS audits are conducted by third-party verification agencies, the company said in the report.
In addition to changing some of its processes, Shein has more than tripled the number of audits it conducts as its market value and global footprint have grown over the last few years. It conducted 3,990 audits as of last year, up from 664 in 2021 and 2,812 in 2022.
Regulatory Background & Global Scrutiny
Shein’s efforts to tighten its internal policies and to pay increased attention to its manufacturing operations are not taking place in a vacuum. These actions come alongside growing regulatory action centering on companies’ supply chains and consumer interest in where their products come from. Experts expect that global supply-chain-related scrutiny will increase in coming years. For instance, the stricter child labor policies that Shein introduced in October 2023 follow from news that the Council for the European Union and the European Parliament announcing that they had reached a provisional deal on the Corporate Sustainability Due Diligence Directive. That directive aims to “enhance the protection of the environment and human rights in the EU and globally,” and requires companies to conduct due diligence across their operations, subsidiaries, and value chains. It applies to both EU and non-EU companies, targeting all companies active in the EU market, such as fast fashion giants like Shein.
Meanwhile, in the U.S., lawmakers have conducted their own inquiries into Shein and other fast fashion companies’ practices. In December, for instance, the House Committee on Energy and Commerce requested that the company answer questions about forced labor concerns. That inquiry was followed four months later by a U.S.-China Economic and Security Review Commission report that echoed many of the same allegations.
And on the consumer-activist side, as recently as this summer, worker rights activists in the United Kingdom campaigned for the government to block Shein’s push for listing on the London Stock Exchange over ethical concerns connected to its supply chain. Those efforts followed an investigation by Switzerland-based nonprofit group Public Eye in May, which found that workers producing garments for Shein regularly work more than 70-hour weeks, among other labor-related findings.
Angela Santos, who leads ArentFox Schiff LLP’s Custom Practice and Forced Labor Task Force, said that as regulators continue to tighten the rules surrounding supply chain ethics and consumer activists become more engaged, companies like Shein will be forced to keep up. “There is just a lot of new pressure that is being placed on fashion companies to know their entire supply chain and be aware of their responsibility and accountability for it,” Santos told TFL, noting that this can be a big task for companies because of how quickly regulations are being passed and the new scrutiny that has developed around fast fashion.
“Many fashion companies have been doing work in the social responsibility space for a long time, but these new requirements are different – it’s not just making sure the person or company who is producing the clothing has ethical labor practices, it’s knowing your whole entire supply chain, ” she said. “They have to go all the way up, they have to know who those suppliers are and know their labor practices, which is its own challenge.”
This complex new regulatory framework and the requirements associated with it can be hugely expensive for retailers, and it becomes even more complex (and expensive) because of the variety of laws in all the countries the companies operate in, Santos said. She stated that the rising scrutiny is not only creating a new industry of third parties with business models built around assisting companies in navigating the regulations, but also forcing companies to reassess their internal business practices, as Shein has done here.
“From sourcing to finance to compliance to customs – all of these departments have to talk to each other to make sure they’re complying with these new regulations and get the documentation to prove it,” she said. “It’s creating a huge change operationally, both outward facing as well as inward facing.”
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