May 2, 2023
Photo: iStock | sbayram
Should SHEIN Be Worried After House Members Call for SEC Action?
A group of bipartisan Congressional lawmakers has sent a letter to the Securities and Exchange Commission (SEC) asking it to require Shein to certify that its products are not made in Chinese factories that use Uyghur forced labor.
The lawmakers are urging the SEC to take action ahead of a potential initial public offering by the company, according to press reports.
The letter written by U.S. Representatives Jennifer Wexton (D-VA) and John Rose (R-TN) cited a Bloomberg analysis from 2022 that found cotton used in Shein’s clothing and sold in 2022 came from the Xinjiang Uyghur Autonomous Region (XUAR). The letter goes on to say that Shein’s assurances that its suppliers do not use forced labor are insufficient and that all products coming out of XUAR should be considered to be made using forced labor.
RetailWire covered the topic of product sourcing in a recent interview with Shein’s global head of strategy and corporate affairs, Peter Pernot-Day.
“For us, it starts with something we call the supplier code of conduct. This is a document that lives on our website. It’s a feature of every supplier agreement that we sign, and it sets out our commitments to abide by the International Labor Organization’s core conventions,” said Mr. Pernot-Day. “It prohibits forced labor. It prohibits labor in violation of local labor laws, prohibits the use of child labor, and is really meant to express our company’s values as to how we expect our suppliers to treat their employees.”
Shein, according to Mr. Pernot-Day, conducted over 2,800 audits in 2022 to make sure that its suppliers were in compliance with its labor standards. He said that the retailer takes appropriate action, including termination of agreements, when a supplier fails to comply.
Mr. Pernot-Day declined to provide a number of suppliers that have been terminated but did say there would be some information on that issue in the coming weeks.
The letter to the SEC also sought to associate Shein with TikTok, which has come under criticism for its effect on children and as a national security risk that could be forced to divulge information about American citizens and businesses to the Chinese government.
“Our marketing strategy, I think, is often associated with social media platforms,” said Mr. Pernot-Day. “A lot of that is organic. Many of the customers we’ve had are so excited about our brand and were met so authentically by our fashions and by our looks that they can’t wait to go on social media and share with their friends. So many of these ‘Shein Hauls’ that we’re famous for are actually organic, unpaid, totally spur-of-the-moment events where people are just delighting in our product.”
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Ryan Mathews
Founder, CEO, Black Monk Consulting
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Discussion Questions
DISCUSSION QUESTIONS: How effective are labor auditing systems used by retailers and brands in foreign nations? Does Shein’s code of conduct policy differ from other retailers operating in the U.S. that source goods from China and elsewhere?
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Unless a retailer owns its factories and sources its own raw materials, its ability to monitor these child labor and forced labor issues is not strong enough. Having a code of ethics, and a written policy barring inhumane labor practices, is no substitute for “feet on the ground” conducting unannounced factory inspections. Shein and other importers of foreign-made apparel are often at the mercy of third-party sourcing agents whose own oversight is rarely strong enough. This is just the latest example of a problem that has been plaguing the retail industry for many years.
The use of child and/or forced labor is really a binary proposition. Either coerced labor is used at any given point in the supply chain or it isn’t. There is no room for gray areas here. If that’s the standard we should be using, and I believe it is, then I’d say most labor auditing systems are dubious, including some in our own country.
Five days ago Congressman Dan Kildee (D-MI 8th District) introduced a bill (the Combating Child Labor Act) that would punish corporations for using child labor inside the U.S. Kildee and his co-sponsors cite Department of Labor statistics indicating that — in America — illegal child labor has increased by 69 percent since 2018. If we can’t police child labor in America, how can we hope to control it in the rest of the world?
I’m not sure how Shein’s code of conduct measures up against other retailers, I assume most of them sign some kind of similar anti-child labor convention or agreement. And I’m sure some monitoring does go on and that suppliers are, in fact, delisted. But anyone who thinks that Uyghur “workers” are being treated well doesn’t know much about Chinese “domestic” policies.
Of course you only see what you want to see.
Most of us are walking around with mobile phones apparently permanently attached to us, but how many of us ever think about the child and/or slave labor conditions in cobalt mines in the Democratic Republic of Congo that make it possible for us to do such essential things as hopping on TikTok? Anyone that wants to feel guilty next time they forward a GIF meme — or send an email for that matter — should read “Cobalt Red” by Siddharth Kara, a fellow at Harvard’s T.H. Chan School of Public Health and the Kennedy School.
My bet is that most won’t ever read it because we’d rather tweet than think about the real world consequences associated with our digital lives. The same is true of some manufacturers in highly competitive industries. But the real truth is that every day what you don’t want to know is hurting, maiming, and killing others whose blood and pain make our lives so much easier, many of them children or slaves.
The only way to truly determine the extent of forced labor is to do it on the ground. While forced labor is illegal in China, unpaid job training is not (billed as “internships”). Various NGOs and news organizations estimate that between 500,000 and 2 million Uyghurs are in “re-education camps.”
The challenge for any company is Xinjiang produces over 20 percent of all cotton cultivated worldwide. Who produces it? The majority of the Xinjiang population is of Chinese ethnicity. Of the 26 million people, about 10 million are Uyghur. Of those, the majority are not in re-education camps.
What is a company to do? Once upon a time, Nike (and many others) had to deal with foreign child labor. They self-determined the solution. The worst thing that can happen around this issue is to have know-nothing politicians make hay out of the headlines.
Precisely. Tho I think you may be giving the “know-nothing” politicians too little credit: I suspect they know exactly what they’re doing.(even if it isn’t what they want us to think it is.)
They know exactly what they are doing. They keep the fires burning.
My thought is that they’re most effective in countries that have strong , open governments; which of course is precisely where they’re not likely to be needed (i.e. a roundabout way of saying “not much”)
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Unless a retailer owns its factories and sources its own raw materials, its ability to monitor these child labor and forced labor issues is not strong enough. Having a code of ethics, and a written policy barring inhumane labor practices, is no substitute for “feet on the ground” conducting unannounced factory inspections. Shein and other importers of foreign-made apparel are often at the mercy of third-party sourcing agents whose own oversight is rarely strong enough. This is just the latest example of a problem that has been plaguing the retail industry for many years.
The use of child and/or forced labor is really a binary proposition. Either coerced labor is used at any given point in the supply chain or it isn’t. There is no room for gray areas here. If that’s the standard we should be using, and I believe it is, then I’d say most labor auditing systems are dubious, including some in our own country.
Five days ago Congressman Dan Kildee (D-MI 8th District) introduced a bill (the Combating Child Labor Act) that would punish corporations for using child labor inside the U.S. Kildee and his co-sponsors cite Department of Labor statistics indicating that — in America — illegal child labor has increased by 69 percent since 2018. If we can’t police child labor in America, how can we hope to control it in the rest of the world?
I’m not sure how Shein’s code of conduct measures up against other retailers, I assume most of them sign some kind of similar anti-child labor convention or agreement. And I’m sure some monitoring does go on and that suppliers are, in fact, delisted. But anyone who thinks that Uyghur “workers” are being treated well doesn’t know much about Chinese “domestic” policies.
Of course you only see what you want to see.
Most of us are walking around with mobile phones apparently permanently attached to us, but how many of us ever think about the child and/or slave labor conditions in cobalt mines in the Democratic Republic of Congo that make it possible for us to do such essential things as hopping on TikTok? Anyone that wants to feel guilty next time they forward a GIF meme — or send an email for that matter — should read “Cobalt Red” by Siddharth Kara, a fellow at Harvard’s T.H. Chan School of Public Health and the Kennedy School.
My bet is that most won’t ever read it because we’d rather tweet than think about the real world consequences associated with our digital lives. The same is true of some manufacturers in highly competitive industries. But the real truth is that every day what you don’t want to know is hurting, maiming, and killing others whose blood and pain make our lives so much easier, many of them children or slaves.
The only way to truly determine the extent of forced labor is to do it on the ground. While forced labor is illegal in China, unpaid job training is not (billed as “internships”). Various NGOs and news organizations estimate that between 500,000 and 2 million Uyghurs are in “re-education camps.”
The challenge for any company is Xinjiang produces over 20 percent of all cotton cultivated worldwide. Who produces it? The majority of the Xinjiang population is of Chinese ethnicity. Of the 26 million people, about 10 million are Uyghur. Of those, the majority are not in re-education camps.
What is a company to do? Once upon a time, Nike (and many others) had to deal with foreign child labor. They self-determined the solution. The worst thing that can happen around this issue is to have know-nothing politicians make hay out of the headlines.
Precisely. Tho I think you may be giving the “know-nothing” politicians too little credit: I suspect they know exactly what they’re doing.(even if it isn’t what they want us to think it is.)
They know exactly what they are doing. They keep the fires burning.
My thought is that they’re most effective in countries that have strong , open governments; which of course is precisely where they’re not likely to be needed (i.e. a roundabout way of saying “not much”)