What: Shein implements market-specific cotton sourcing rules to comply with forced labour prevention legislation while preparing for London IPO.

Why it is important: The timing of this announcement, coinciding with Shein's IPO preparations, reveals the increasing importance of ESG compliance in accessing capital markets.

Shein has announced new cotton sourcing requirements for its contract manufacturers, specifically targeting compliance with the Uyghur Forced Labour Prevention Act for products sold in the United States. The company's approved cotton sources include Australia, Brazil, India, the United States, and selected countries in Europe, Middle East, Africa, and Southeast Asia, notably excluding China. This policy comes as Shein faces increased scrutiny during its preparation for a London IPO, with the company's general counsel providing written evidence to a British parliamentary committee. While the supplier code of conduct prohibiting forced labour applies globally, the company acknowledges different standards across markets, stating that Chinese cotton isn't specifically prohibited where local regulations permit its use. This has prompted further questioning from Labour lawmaker Liam Byrne regarding products sold in the UK market. Shein employs isotopic testing firm Oritain to verify cotton origins, with recent testing revealing that 1.3% of cotton came from unapproved regions, though specific locations weren't disclosed.

IADS Notes: Recent developments highlight Shein's complex regulatory navigation across global markets. In January 2025, the company faced intense parliamentary scrutiny in the UK over employment rights, while December 2024 saw operations suspended in Vietnam amid regulatory concerns. This cotton sourcing announcement follows a year of significant developments, including predictions of growth slowdown and the implementation of stricter global fashion industry legislation in May 2024. The company's approach reflects broader industry shifts, as noted in market analyses showing increasing pressure on fast-fashion retailers to demonstrate robust ESG compliance.

Shein imposes cotton sourcing rules amid forced labour allegations