![]() An investor can easily end up “on the wrong side of evolving regulation or consumer sentiment.”Īnd Shein stands accused of numerous offenses. A company’s performance on sustainability can have a big impact on its ability to attract capital, says Jenny Davis-Peccoud, global head of sustainability at Bain & Co. BlackRock, Vanguard, and State Street Global Advisors have all committed to vote against directors of companies that don’t act on issues such as climate change. ![]() Environmental and social resolutions received 33 per cent support in the most recent season of shareholder meetings, up from 22 per cent five years earlier, according to Bloomberg Intelligence. In the US, money managers are putting more pressure on companies over ESG concerns. But the situation is muddied because of the huge number of suppliers the company uses. The factories Shein uses are not in that region. In the fashion world, those origins also raise the issue of Xinjiang-the region that produces about 85 per cent of China’s cotton and whose name has become synonymous with forced labor allegations. Right or wrong, that brings additional scrutiny at a time when the fractious US-China relationship is becoming even more difficult. One thing the retailer can’t change is its Chinese roots. To survive among the biggest players, Shein may need to undertake a similar overhaul. But as ESG’s place in the public consciousness has grown, Western apparel giants such as Inditex SA’s Zara and Hennes & Mauritz AB have made efforts to clean up their image through recycling drives, “eco-friendly” clothing collections, and similar initiatives. Fast fashion is an enormously wasteful business, exacerbating the fashion industry’s environmental impact, according to a 2019 report by the World Bank, which said the number of new garments produced had doubled compared to the 50 billion made in 2000. Some of the criticisms Shein faces apply to its rivals, too. While many early backers valued growth over sustainability, the company wants to minimize the risk that its policies could stand in the way of a successful IPO, the people say. The current drive to improve Shein’s ESG performance reflects its preparations for a possible listing, say people familiar with the matter, who didn’t want to be named because the information isn’t public. Hoping to justify its astronomical valuation, the retailer is rushing to shed its reputation as an ESG villain a team of new executives is focused on changing the company’s image. While many of its young customers don’t seem to care, the people and institutions with real power over Shein’s future-investors, regulators, and politicians-have little choice but to pay attention.Īs part of its latest fundraising round earlier this year, Shein told existing investors that it hopes to have an initial public offering in the US as soon as 2024, people familiar with the company’s thinking told Bloomberg. Indiana University, which announced a Shein partnership just months ago, has put new plans on hold as a result of concerns about the company. But Shein’s business model is also the source of a potentially toxic image problem that’s sparked allegations of environmental damage, worker exploitation, and copyright theft. Investors to date include Tiger Global Management, IDG Capital, and Sequoia Capital China. With sales of at least US$16 billion in 2021, up from US$10 billion in 2020, and a valuation of about US$100 billion, the company has catapulted into the same league as Elon Musk’s SpaceX and TikTok parent ByteDance Ltd. A vast network of contract manufacturers allows Shein to pump out thousands of youth-friendly styles daily at barely believable prices-a few dollars for a dress and even less for a pair of bike shorts. But as environmental, social, and governance issues become ever more important to investors, the retailer’s promotion of disposable fashion may be evolving into the biggest threat to its continued success. Turbocharging fast fashion’s business model has turned Shein into the face of the industry and one of the world’s top startups. ![]() “If I can get a good picture, definitely at least once.” “Maybe just once or twice, that’s all,” she says, laughing, as she browses Shein’s San Francisco pop-up shop, a special marketing event for the usually online-only retailer. The 26-year-old reckons she spends as much as US$500 twice a month on about 20 to 30 clothing items she’ll barely wear. Like many Shein customers, Jaleesa King doesn’t expect the Chinese fast-fashion giant’s clothes to last longer than it takes to post a good selfie on Instagram.
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