‘Disposable’ clothes, oversight risks: Shein IPO will not mask sustainability challenges

Shein, the Chinese e-commerce giant, is set to go public in a market that has become far more skeptical of its sustainability efforts than before. Despite working to improve its ESG credentials, the company continues to face regulatory investigations and criticism over its environmental impact, labor standards, and governance. Shein's efforts to list in Hong Kong, New York, and London have been met with scrutiny from politicians and investors alike, with concerns over its carbon emissions, labor conditions in its supply chain, and the potential for large fines.

The company has faced fines in Europe and the US for illegal products and greenwashing, and continues to be investigated by the European Commission and the US Federal Trade Commission. Despite these challenges, Shein has made improvements in its supply chain, with 53% of its suppliers receiving the top grades in audits, up from 47% the previous year.

However, this progress has come amidst ongoing concerns about its governance structure, particularly the company's dual-class share structure and the concentration of voting rights among its four co-founders. This gives them 90% of the voting rights, potentially weakening independent oversight and increasing the risk of misalignment between management and minority shareholders.

Critics also argue that Shein's business model, which relies on low prices and high volume, contributes to the disposable nature of fast fashion and exacerbates its environmental impact. The company's 2025 sustainability report highlights some improvements, but critics argue that the sheer volume of product offerings and the use of plastic materials in its garments continue to raise concerns about sustainability.

As investors grapple with the question of whether Shein's growth strategy can be compatible with a long-term sustainability transition, the company's commitment to transparency and accountability will be put to the test.