By Helen Reid and Simon Jessop
LONDON, Aug 25 (Reuters) - Shein is finally going public, but in a far more hostile world than when the Chinese online retail giant's IPO journey began five years ago.
The company has worked hard to address environmental, social and governance (ESG) concerns that have triggered regulatory investigations and fines in several countries, complicating previous attempts to list its shares. Many of those challenges remain and could weigh on its valuation after its stock market
debut in Hong Kong next month.
Efforts to list in New York and London drew criticism from politicians and investors over its environmental impact, labour standards and governance, and active regulatory investigations continue to cast a shadow over the Hong Kong flotation.
FAST FASHION UNDER INCREASED SCRUTINY
Shein is under investigation by the European Commission and the U.S. Federal Trade Commission. Previous probes resulted in fines in France over alleged fake discounts and in Italy over greenwashing as fast fashion comes under increased scrutiny from regulators.
The company has responded by improving disclosure of its sustainability initiatives, hiring consultants and setting up an external ESG advisory board in 2024. Its annual ESG report grew to 118 pages last year, up from 28 pages in 2021.
Despite the push to improve its public image, several European and Asian investors said they remain concerned about labour conditions, governance structure, regulatory scrutiny and efforts to reduce carbon emissions.
"The company continues to face serious ESG controversies, particularly around working conditions and labour rights in its supply chain, supply chain traceability, environmental impacts and the broader sustainability implications of its high-volume, ultra-fast-fashion business model," said Janina Bartkewitz, ESG analyst at Union Investment in Frankfurt, which managed €569 billion ($664 billion) of investment at the end of June.
A Shein spokesperson said: "Shein is committed to maintaining high standards of corporate governance, transparency and accountability. We operate in compliance with applicable laws, regulations and listing requirements, and continue to review and strengthen our governance practices as the business evolves."
Shein's 2025 sustainability report pointed to improvements in its supply chain, with 53% of its suppliers receiving the top grades in audits, up from 47% in 2024.
The European and U.S. investigations, however, raise the risk of large fines. The European Commission recently fined Alibaba-owned AliExpress €550 million and PDD-owned Temu €200 million over illegal products.
Beyond any financial impact, however, the level of regulatory scrutiny raises questions about compliance, internal controls and board oversight, Bartkewitz said.
Some investors also flagged governance issues as concerns grow over the influence wielded by founders of some of the world's largest companies.
RISKS TO INDEPENDENT OVERSIGHT
Shein's dual-class share structure gives class A shares 10 votes each and class B a single vote. As a result, the company's four co-founders will hold 59.6% of overall shares but have 90% of the voting rights after the IPO, Monday's stock market filing showed.
This gives the co-founders significant influence over shareholder decisions, and without a fixed expiry, said Kiran Aziz, head of responsible investments at Norway's KLP pension fund, which manages more than €80 billion.
Shein also combines the roles of chief executive and chairman. All four co-founders sit on the board while holding executive positions, and only three of the seven directors are independent.
"Taken together with the concentrated voting control, this risks weakening independent oversight and increasing potential misalignment between management and controlling shareholders on the one hand, and minority shareholders on the other," said Aziz.
SHEIN EMISSIONS DOUBLE THOSE OF INDITEX
Shein has sought to portray its business model as less wasteful than its fast-fashion rivals because it tests new products with small samples before ramping up production based on demand, enabling it to keep very little unsold inventory.
But critics argue that its rock-bottom prices and aggressive marketing encourage shoppers to buy frequently and impulsively — behaviour fundamentally at odds with sustainability goals.
Shein's vast and constantly changing website offers 4,700 new styles each day and more than 2 million apparel styles overall, its filing said.
"Shein is making garments primarily from plastic and selling them at nearly half the prices of H&M and Zara. So the fact that there's no 'excess' ... well, everything they make is more disposable, just based on price alone," said Ken Pucker, professor of the practice in sustainability at the Fletcher School at Tufts University.
The company also compares poorly against Zara owner Inditex on carbon intensity. Shein reported greenhouse gas emissions roughly double those reported by Zara owner Inditex in 2025, even though Shein's annual sales of $41.8 billion were lower than Inditex's €39.9 billion ($46.54 billion).
The central question for investors is whether Shein's growth strategy is compatible with a credible long-term sustainability transition, given fast fashion's dependence on high volumes, short product cycles, resource consumption and waste, said an ESG-focused Asia-based investor who asked not to be named because she was not planning to invest in the IPO.
($1 = 0.8573 euros)
(Reporting by Simon Jessop and Helen Reid in LondonEditing by David Goodman)
