Shein has released its third annual report on sustainability, this one covering 2023. This is an expanding document, increasing from 28 to 43 and now to 62 pages, and increasingly quantitative, with ever more appendices.
What has drawn the most coverage in the press this time around is the disclosure (on page 22) of two cases of child labor in the company’s supply chain. Neither of Shein’s previous two reports contain any such disclosures. According to Shein, the cases came to light in the first three quarters of 2023, thanks to the Shein Responsible Sourcing (SRS) audits.
The company says that it suspended orders with the contract manufacturers upon making these discoveries, giving them 30 days to “remediate their offenses.” The children’s labor contracts were terminated, their outstanding wages were paid, they were given medical checkups, and they were repatriated to their parents or legal guardians. In addition, Shein ensured that the manufacturers “strengthened” their screening of new hires by “checking and maintaining records” of employee IDs. It then permitted the manufacturers to resume their business with Shein.
SRS auditors found no cases of child labor in Q4 2023. Nor did they find instances of forced labor at any point during the year. That said, Shein did terminate five suppliers, for “contravening SRS Policy.”
Additionally, workers at a factory in Guangzhou filed a complaint in June 2023 over unpaid wages for the month of April. Shein says its investigation discovered delays attributable to a cash flow shortage and an absence of written notice to the workers. In response, it got the wages paid within ten days.
The company says it conducted 3,990 SRS audits on its Chinese suppliers in 2023 – 2,796 of them covering about 95 percent of the year’s “Shein-branded products by procurement value.” These audits assign one of five grades to Shein’s suppliers: A, B, C, D or E, from best to worst. Until 2023, the grade of E was called ZTV, for zero-tolerance violations. Here, with the worst grade renamed, is a comparison of the past three years’ findings:
| SRS supplier grades | |||
|---|---|---|---|
| Grade | Percentage of suppliers | ||
| 2023 | 2022 | 2021 | |
| A | 9% | 4% | 2% |
| B | 20% | 14% | 15% |
| C | 51% | 47% | 66% |
| D | 18% | 24% | 5% |
| E | 2% | 11% | 12% |
| Source: Shein Sustainability and Social Impact Reports for 2021, 2022, 2023. | |||
It appears that ZTV has, since October 2023, been split into two categories: immediate-termination violations (ITVs) and immediate-remediation violations (IRVs).
ITVs include bribery and refusals to cooperate with Shein. Violators formerly had 30 days to remediate, but Shein says it will now cancel a contract on discovery of an ITV.
IRVs include pollution and failure to pay a minimum wage. Shein says it used to cancel contracts within 90 days if a supplier failed to remediate but has now reduced this grace period to 30 days.
