How Can Shein Clean Up Its Act?
With around 2,000 new items made every day showing up on its website, low prices, and free marketing from many social media influencers, fast-fashion company Shein is teeing up to go public. First founded in 2016, it didn’t start making this massive push in the industry until recent years, when it went online and offered cheaply made items at a pace that other fast fashion brands couldn’t keep up with.
With the low pricing for consumers, many bought up various trendy designs without a second thought, gladly posting videos online about the various items that they purchased. It seems innocent at first, until we realise later that the company is a worse version of other fast fashion brands that have come before.
Shein has stolen designs or produced knockoff copies. The company has also had terrible working conditions. And naturally, there is its environmental impact, which Shein has dramatically outpaced over brands like H&M and Zara.
Supply Chain Model Sustainability?
With various concerns and environmentalism on the public’s mind, Shein is getting a lot of attention, and each move it makes is under scrutiny. Between possibly going public and revolutionising the fast fashion industry, Shein has been putting a lot of effort into positioning itself as a bit of a trendsetter while also trying to convince us all that it’s a sustainable clothing company.
Shein has donated $15 million to the Or Foundation, which is one of the first times a clothing brand has acknowledged the environmental waste is being dumped in Ghana. Shein has also pledged to clean up some of its social efforts by putting more money into facilities and hiring industry veterans for key leadership positions. They have even set up a resale programme to help with the clothing waste issue.
But while those efforts are better than nothing, we wouldn’t say these moves are ‘revolutionary’ or ‘trendsetting’. In the context of Shein, the company should be doing more. Especially if Shein is claiming to be more sustainable.
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First, Reduce The Number Of Designs
Even though Shein has limited inventory for its designs, the fact that it’s an international company and is outputting roughly 2,000 designs per day on its website shows the insane scale of resources it needs in order to stock up with the day's new clothing. Already at this pace, this is unsustainable for the sheer fact that it’s using materials that are questionable.
The SEC audit from Congress is again looking at the use of material that is banned in the US. Beyond that, the amount of lead found in a lot of its clothing is under scrutiny. There have even been instances of bugs in the packaging.
What a lot of these problems point to is a quality issue with the product, which makes sense when you consider that Shein expects so many designs in such a short time. When workers are put under such constraints, they’ll optimise clothing production for efficiency and not quality. Even if Shein is working with other designers in its new Shein X Incubator Program, this feels more like an excuse to shift the blame whenever another design issue springs up.
Ultimately, if Shein is to be more sustainable, it’s smarter for the company to produce significantly fewer clothing designs and rely on other systems. After all, with fewer designs being taken up, Shein could lean into its reusable clothing programme, offering customers particular perks on its platform and generating other revenue streams it wouldn’t have otherwise.
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Second, Ramp Up Reusable Clothing Programme
While a reusable programme is nice, the current output and materials that the clothing has don’t support it very well. Shein's production of so many items every day means customers reselling their clothes on Shein’s platform are competing with Shein itself on their own turf. Combined with clothing made of cheap materials, the quality of the clothing is not destined to last for more than a year.
If Shein reduced the number of clothing items it put in its store every day, this could allow for better materials to be used. Not only that, but it would allow Shein to focus on improving this system to make it stand out more.
It’s uncertain what costs are associated with reselling clothing on Shein, but considering it sells clothes this cheaply, the profit margin is still reasonable for the company. In essence, a reusable programme where Shein takes half (or more generously, a quarter) of the profits could create enough incentive for customers to begin selling Shein clothing there.
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Third, Put Your Money Where Your Mouth Is
When Shein revealed its revenue potential to investors, the Financial Times report pegged its internal sales at US $22.7 billion, on par with or outpacing Zara and H&M. What this means is that Shein has the cash to spend, and if it becomes publicly traded, it’ll have way more funds to work with.
And with plans for a Mexico factory, Shein is bound to be making more money despite its controversy.
The issue here is the fact that while Shein is putting pressure on other fast fashion brands with some of its “sustainable” moves, its efforts are undercut by the fact that Shein is a theoretically multi-billion dollar company.
$15 million to the Or Foundation is a lot of money. But Shein could make that much money in a matter of hours. Another $15 million to improve facilities is nice on the surface but is undercut by Shein’s billions in valuation. This is on top of the fact that the funding is split across all facilities. Considering the size of Shein, it’s estimated that each facility would get $50,000 for improvements.
We’re not saying the company should make no profit from improving these facilities, but if Shein is truly committed to solving these issues, the amount of money they’re putting towards these efforts is minuscule when compared to their earnings. For a company that’s trying to appear sustainable, it’s doing more blame-shifting and small gestures than actually addressing root problems.
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To see a fast fashion brand trying to be sustainable is a genuinely nice thing to see. Even if you buy your clothing from thrift stores or if they’re passed on to you, we might still hope that other brands work to be more sustainable. To see Shein tackle these issues reveals that getting there will take a lot of work. But it also reveals that your stereotypical business practices won’t be enough and there's plenty to be done to improve from an ESG standpoint.
Shein can’t just donate a handful of millions to certain organisations and facilities in the hopes that these problems will go away. Shein’s current business practices are the problem. The focus in on creating demand for 'latest trends', every day a 'new season'. This is manufacturing for the sake of volume. They convert raw materials and natural resources into manufacturing processes that reduce production times and improve efficiency, all to generate end finished products that, through the wonder of supply chain management, ship across the world to retailers and end user consumers who may wear a garment a few times before discarding it.
This form of business is an example of how we put technology development to poor use, where 'success' uses land, labour, transportation and human activity to simply generate growth. This, to the detriment of externalised natural and human capital.
And what is left behind this? Supply chains leave scant regard for habitat destruction for garment agriculture, stress on garment workers and local communities, or reducing emissions along the way. Climate change takes a back seat when the business model is ultimately turning natural resources into landfill, natural resources which could be allocated more effectively elsewhere.
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Let Shein, Shine
For Shein to truly shine in a sustainable way, it needs to consider extending itself further, which begins with better materials, more cooperation with designers and activists, and making way less clothing while offering those low prices.
Nothing new is on the table here, it's simply the hard truth that if we measure success by volume and pure expansive growth, we will hit a wall. If the garment sector accepts the environmental and human effects of fast fashion, it will acknowledge that wall was already hit a long time ago.
We can put technology to better use, but the garment manufacturers need healthy demand signals from consumers and retailers alike that on-demand seasonal delivery, circularity, and ESG factors are all part of a supply chain model that can deliver healthy profitability with actual improved efficiency, and not just an endless quest for the latest trends.
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