Shein’s stock market listing will not mask sustainability challenges

Shein is set to go public, but its IPO will not erase sustainability challenges. The Chinese online retail giant has been working to address ESG concerns that have led to regulatory investigations and fines in several countries, complicating earlier attempts to list shares. These ongoing issues could impact its valuation following its Hong Kong stock market debut next month.

Shein is currently under investigation by the European Commission and the U.S. Federal Trade Commission, with previous probes resulting in fines in France and Italy. The company has responded by improving its sustainability disclosures, hiring consultants, and forming an external ESG advisory board in 2024. Despite these efforts, many investors remain concerned about labor conditions, governance structure, regulatory scrutiny, and the company's fast fashion business model's environmental impact.

ESG analyst Janina Bartkewitz notes that Shein still faces serious ESG controversies, particularly around working conditions, supply chain traceability, environmental impacts, and the sustainability implications of its high-volume, ultra-fast-fashion model. The company's dual-class share structure gives its founders significant voting power, which could weaken independent oversight and misalign management interests with minority shareholders.

Critics argue that Shein's rapid production and low prices encourage frequent, impulsive purchases, conflicting with sustainability goals. However, the company claims to produce garments more sustainably than its rivals by testing new products with small samples before bulk production and keeping minimal unsold inventory. Nonetheless, concerns persist about Shein's long-term compatibility with a credible sustainability transition, given the nature of fast fashion.