Stock exchange win by Shein a blow to supply chain transparency

Global fast fashion retailer Shein recently took a major step closer to listing on the London Stock Exchange (LSE) as reported by Reuters. The UK’s Financial Conduct Authority (FCA) has given its approval for the listing despite evidence and pressure from rights groups all pointing to modern slavery. The company is under fire due to a lack of transparency and suspected forced labor in their supply chain.  

Unethical any way you slice it 

Evidence-based accusations of dirty practices have plagued Shein’s ethical reputation almost from the start. From worker exploitation to copyright infringement to environmental harm, Shein has it all. This results in low prices for consumers, as someone else bears the cost. In 2022, laboratory tests found that some of Shein’s cotton was sourced from the Uyghur Region, an area almost synonymous with forced labor. That’s why rights campaigners and the Fashion Council opposed Shein joining LSE.  

In a letter written to the LSE in response to Shein’s application, the chair of a British parliamentary committee Liam Byrne asked,  

“What checks, if any, the London Stock Exchange has in place to authenticate statements by firms seeking to list, with particular regard to their safeguards against the use of forced labor in their products.” 

The letter went on to raise credibility concerns about the evidence given by Shein’s representative during a hearing. The letter stated there was a “lack of response” by Shein’s general counsel to questions about their supply chain. Byrne stated that due to the silence, the committee remained “profoundly concerned.” 

Typical tactics to obscure the truth 

Shein itself does not own or operate any manufacturing facilities for the products it sells. The products are sourced from around 5,800 third-party contract manufacturers. And the majority of those are in China. This kind of manufacturing model makes it easier for retailers to claim ignorance or hide forced labor. 

According to Byrne, 

“When pressed on whether Shein sources cotton from China, Zhu (Shein’s representative) did not answer and asked the committee for permission to send responses in writing. Her repeated refusal to answer questions “bordered on contempt” for the committee…” 

To be listed on the LSE, Shein will also need to secure approvals from Chinese regulators. In particular, they’ll need sign-off by the China Securities Regulatory Commission (CSRC). That means Shein will also be subject to the CSRC’s listing rules. But regardless of what those rules say, they are applied on “a substance over form” basis. That means the CSRC can use its discretion on when and how to implement them.

However, the road forward for Shein isn’t all smooth sailing. It’s thought that Trump’s trade war with China will lead to weaker consumer spending in the US which leaves the future of many retailers, including Shein and its rival Chinese discount retailer Temu, uncertain.

The Freedom United community stood beside partners, allies, and advocates to try and hold Shein accountable and block their listing on the LSE. Despite this setback, the fight to prevent the normalization of the inclusion of forced labor-linked corporations in global financial markets continues. Join us in the ongoing battle to stop human rights being sidelined in the pursuit of profit.