Chinese fast fashion giant Shein has revealed that it uncovered two cases of child labor in its supply chain last year, as part of its efforts to tighten scrutiny of the manufacturers that produce its low-cost apparel. The disclosure, made in Shein’s 2023 sustainability report, comes as the company is reportedly preparing for an initial public offering (IPO), potentially on the London Stock Exchange.

Shein stated that it temporarily suspended orders from the suppliers involved in the child labor cases, only resuming business after the suppliers implemented stricter measures to prevent such violations in the future. “Both cases were resolved swiftly,” the company said, detailing that steps included terminating the contracts of underage workers, ensuring payment of outstanding wages, providing medical checkups, and arranging for the workers to be repatriated to their parents or legal guardians.

As part of its updated supplier policies, Shein announced that any violations involving child labor or forced labor would now result in the immediate termination of contracts. This marks a significant shift from the previous policy, which allowed suppliers 30 days to resolve such issues before facing termination.

The company revealed that these violations were identified in the first nine months of 2023, with no further incidents reported in the last quarter of the year. In total, Shein conducted 3,990 audits in 2023, a significant increase from previous years, utilizing third-party agencies for the majority of these inspections.

SHEIN Facing Scrutiny Amid IPO Plans

Shein’s revelations come at a critical time, as the company is rumored to be laying the groundwork for a public stock offering. In June, Shein reportedly filed preliminary documents for a London listing. This potential IPO has already drawn criticism, particularly from U.S. lawmakers. Senator Marco Rubio, a leading Republican on the U.S. Senate Intelligence Committee, raised concerns about Shein’s business practices, labeling the company’s success as being built on “slave labor, sweatshops, and trade tricks.”

Shein responded to these criticisms by reiterating its commitment to human rights and asserting that it has a “zero-tolerance policy for forced labor.” The company also highlighted its efforts to increase transparency across its supply chain and to ensure that its contract manufacturers comply with stringent ethical standards.

SHEIN Environmental Impact and Corporate Governance

The 2023 sustainability report also shed light on Shein’s environmental impact, particularly its carbon footprint. The company acknowledged that its emissions from transporting products had more than doubled in the past year, reaching 6.35 million tonnes of carbon dioxide equivalent. Shein has started sourcing products from suppliers closer to its customer base in Turkey and Brazil, which it says will help reduce transport-related emissions.

In a bid to strengthen its governance, Shein established a board-level sustainability committee in July 2023. The committee includes key figures such as Shein’s CEO, executive chairman, and representatives from major investors, indicating a move towards greater transparency and accountability as the company prepares for its potential IPO.

Despite the controversies surrounding its labor practices and environmental impact, Shein continues to grow, with a vast customer base across the globe. As the company navigates these challenges, its future on the stock market will be closely watched by investors and critics alike.