Shein faces greater political scrutiny ahead of planned IPO in London

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The Labor chairman of the business select committee called on his government to ban the import of products made with forced labor in China’s Xinjiang region as he called for greater consideration of Shein’s potential listing in London.

Liam Byrne, a former minister, told the Financial Times that he would like to see a British version of the Uighur Forced Labor Prevention Act introduced in the US in 2021.

The Chinese-founded fast-fashion giant, valued at $66 billion in its most recent funding round, has disrupted the apparel industry with its model of shipping cheap clothes directly from factories in China to Western buyers.

Shein launched its plan for an initial public offering late last year, initially targeting New York, but moved to London after it was rejected by US regulators. Shein is still waiting for Chinese regulators to approve the overseas listing — they are unhappy with the company’s move to loosen its ties to China, according to people familiar with the matter.

Byrne, who was re-elected this week as chairman of the House of Commons committee that scrutinizes business policy, had hoped to call Shein executives to a session in July with other Chinese companies, including TikTok, but this has been postponed due to general elections.

The new committee has yet to be assembled, but it remains a personal priority for Byrne to call the directors for consideration by the committee.

Shein told the FT that he has a “zero tolerance policy” on forced labour.

“Visibility throughout our entire supply chain is of the utmost importance to us and we are fully committed to respecting human rights. To comply with applicable laws, we not only require our contract manufacturers to source only materials from approved regions, but also independently verify this,” he said. A source close to the company said much of its cotton comes from Australia and increasingly from the US.

Shein also partners with Oritain, a company that tests the origin of its cotton supply chains. Oritain found that as of November 2023, less than 2 percent of Shein’s cotton tested positive for unapproved cotton—less than the industry average.

Byrne said he met with representatives of the New York Stock Exchange earlier this year, where they discussed Shein’s listing. “They said it’s clear there are some due diligence issues that haven’t been addressed,” he said.

“My view is that we do not have a Uyghur Forced Labor Prevention Act in the UK and so it is up to ministers to ensure that Shein passes the highest standards of forced labor protection,” he said. “It’s something a Labor government might want to address.”

The US act created a task force to stop imports of goods manufactured in whole or in part in Xinjiang, which is a major source of cotton and where widespread use of forced labor is alleged.

Shein has privately tried to convince Western politicians and regulators that he does not use cotton from the region, while shying away from saying so explicitly for fear of angering Beijing.

Other fashion labels have publicly ditched Xinjiang cotton, even though experts say it is very difficult in practice to remove it completely from supply chains.

Byrne said if a Labor government wanted to build closer trade links with the US government then it needed to raise standards on such issues. “We’re not going to get close to the US on trade until we match the new US benchmarks on labor and environmental standards,” he said. This included ensuring that essential minerals imported into the UK also met these standards, he said.

Earlier this month, business secretary Jonathan Reynolds told the Commons that under the Modern Slavery Act, any business with a turnover of more than £36m must ensure there is no slavery in any part of its supply chain of supply. “Where there are specific allegations, I will look at them. . . it is an area where we have existing legislation and indeed we would go further if that was necessary.”

James Alexander, chief executive of the UK Sustainable Investment and Finance Association, welcomed Shein’s potential parliamentary scrutiny.

“Strong governance standards and safeguards for shareholders have been an important part of the success of the London market in recent years,” he said.

Campaign group Say No To Shein, which is backed by the likes of former Greens MP Caroline Lucas and retail entrepreneur Mary Portas, welcomed Byrne’s comments but said they had bigger concerns about the company’s business model, including the impact on the environment.

Additional reporting by Laura Onita