Shein seems to be under constant scrutiny for a variety of troubling reasons. The fast-fashion industry in general has been heavily criticized for its contribution to the environmental harm done by textile waste, which is a major growing concern. In response, companies like Shein and H&M (HNNMY) started participating in recycling programs or sustainability funds to offset carbon footprints.
Shein has also been called out for building its fame by copying the designs of independent fashion designers who have little to no recourse under copyright law. But thanks to the China-based company's resources in clothing production markets, its ability to clone fashion designs and mass-produce them for pennies on the dollar has helped Shein churn through an endless lineup of new products. Its reach is so large that, in 2021, Shein overtook Amazon (AMZN) as the most downloaded shopping app in the U.S.
As the company's popularity rises, the accusations levied against it continue to grow. From selling clothing made with toxic materials to failing to protect customer data, the company seems to live between the proverbial frying pan and the fire. The company has also been on the receiving end of accusations involving unfair labor practices--and now there is another concern about possible forced labor practices.
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Senators Look to Shein for Answers Regarding Labor
Three U.S. Senators have written a letter to the CEO of Shein this week. Two Democrats, Senators Elizabeth Warren and Sheldon Whitehouse, and Republican Senator Bill Cassidy have written to demand answers regarding the company’s alleged use of cotton that comes from a region of China whose products are banned for import. U.S. federal law states that China’s Xinjiang region produces products created by forced labor -- a claim the Chinese government says is untrue.
In an emailed statement to Bloomberg, Shein claims that it has a “zero tolerance against forced labour,” and that the company does everything it can “to ensure we comply with local laws and regulations.”
“Shein requires that our suppliers purchase cotton from Australia, Brazil, India, US, and other approved regions,” the statement said. “We have built and implemented a traceability management system that gives visibility to the origins of cotton throughout the entire production process.”
The letter requests a reply that clarifies the company’s process to ensure that none of the cotton materials it sends to the U.S. originate from Xinjiang. A few months after a Bloomberg report found two instances of imported Shein products containing cotton from Xinjiang.
U.S. Relations With Chinese Companies Under Watchful Eyes
In late 2020, the Securities and Exchange Commission (SEC) started requiring Chinese companies to submit to more extensive audits. Chinese companies have struggled to provide the requested information due to concerns about Chinese authorities. Last summer, Shein looked to be in talks to go public in the U.S., but that would be no simple task.
"The intricacies indicate how difficult it will be for large Chinese companies to list overseas," Alex Frew McMillan wrote for TheStreet's RealMoney last year. "Shein appears to be in the process of recasting itself as a Singapore corporation. Then again, the Chinese authorities have said their long arm applies to companies that do a substantial amount of business there."
