Corporate Social Responsibility & Sustainable Development

Company Description

on

Fast Fashion Online Retailer

Group-2

PGDM Section-C 2021-2023

Name Roll No

Aditya Varma 21PGDM128

Akshat Khandelwal 21PGDM129

Anuj Singh 21PGDM130

Ayush Jain 21PGDM131

Deval Agrawal 21PGDM132

Bandaru Hanshita 21PGDM009

INTRODUCTION
Shein is a Chinese online B2C fast-fashion retailer. It was founded in 2008 by Chris Xu
In Nanjing, China. In its early stages, Shein was more of a dropshipping business than a
retailer. The company was not involved in clothing design and manufacturing and instead
obtained its products from a wholesale clothing market in Guangzhou.

Women's clothing is the company's major focus, although it also sells men's clothing,
children's clothing, accessories, shoes, luggage, and other fashion items. SHEIN
primarily caters to consumers in Europe, North America, Australia, and the Middle East,
as well as other consumer markets. Since its inception in October 2008, the brand has
adhered to the notion that "everyone can appreciate the beauty of fashion." Its operations
span over 220 nations and areas around the globe.

Originally, Shein did not design its clothes. The company mainly sourced its clothing
from China's wholesale clothing market in the province of Guangzhou. However, Shein
became a fully integrated retailer in 2014 when it secured its supply chain system. Now,
the company utilizes a network of manufacturing partners and suppliers to make and
deliver its products.

Shein makes predictions on trends and produces items as quickly as three days after the
identification of a trend. Shein also limits its orders to small batches of about 100 items to
gauge customer interest, while its other competitors, like Zara, order larger quantities
(about 500), increasing their chances of losing profit if orders are not purchased in full.
Shein is also able to avoid paying export and import taxes, contributing to larger margins.

The U.S. legislative bill Section 321 in the Trade Facilitation and Trade Enforcement Act
of 2015 (also referred to as “de minimis") states that any import up to $800 per person is
duty-free. This bill has allowed Shein to deliver to the USA without paying taxes,
allowing Shein to have a competitive advantage over domestic companies in the USA.

Mission: SHEIN prides itself on offering on-trend styles catering to both young women
and teens, that won’t break the bank. SHEIN adheres to the concept that "everyone can
enjoy the beauty of fashion." SHEIN can stay on top of the latest fashion trends from
around the globe while rapidly bringing these styles to market. So whether you're
searching for boho dresses and graphic tees or patterned blouses and chic swimwear,
SHEIN is the ultimate one-stop shop for the modern yet economical fashionista. It aims
to promptly offer stylish quality products at appealing prices to every user in the world.

Vision: SHEIN aims to provide the highest value trendy pieces while also being
dedicated to quality, value, and service. It all starts when an idea, or a thought, is
conceived by the designer

VALUE & SUPPLY CHAIN ANALYSIS

The traditional strategy (which rose to prominence in the 1960s in Europe) is
characterized by sourcing production from low-wage countries, leading to lower labor
costs as well as longer transportation times, and thus, to a reduction in the flexibility of
the logistical processes. Therefore, in the traditional system, sales forecasts must be made
well in advance of the selling season, resulting in rather high demand uncertainty.
Usually, large quantities of each item are procured, covering the estimated demand for
the full sales period and including sufficient safety stocks. This way, manufacturers
attempt to prevent stock-outs so that as many items as possible can be sold during the
season, including through end-of-season sales at reduced prices. Overall, the focus of the
traditional strategy is on producing standardized clothes at the lowest possible cost.

On the other hand, Fast fashion retailers like Shein are the future present. The Digital
customers, Millennials, and the next generations are demanding a different approach. The
traditional “Funnel” model is over. The Customer Journey is not any more linear, but
continuous and dynamic. There is not a unique model because customer segments are
losing their meaning when technology can filter by profile not group. Omnichannel is
accelerated by technology but empowered by customers' creativity. Customers are the
focus of fashion retail firms when starting to design the collection, and big data (e.g.
machine learning), demand sensing, social buzz, RFID, amongst others, are tools that
make it easier to identify trends and have a more accurate forecast, inventory
management, logistics, and warehouse optimization. The whole value chain is
revolutionized. It’s time for a customized, segmented supply chain enhanced by a digital
platform.
Material Impact of the business on environment and society
If you have ever browsed SHEIN it's likely you have been reeled in by their staggeringly
cheap prices and unfathomable range of products. Everything from shapewear to nail kits,
designer knockoffs to pet toothbrushes (yes, really) can be found on the e-commerce site

If a fashion label launches a new dress, chances are it will have cropped up on SHEIN –
albeit in a much cheaper, polyester-ridden form – before the end of the day. Due to this
rapid production process, SHEIN's ethics have been called into doubt numerous times,
and with good reason.

While many retailers are attempting to reduce their carbon footprint by using eco-friendly
materials, SHEIN is not one of them. The company claims to make apparel in batches of
50-100 on its website, it adds 6,000 new pieces per day, with an average price of £7.20.
The number of new things SHEIN releases every week can never be sustainable for our
world, as it encourages people to overuse them and think of their garments as disposable
and simply leads to landfill garbage from the garment industry. SHEIN has made no
effort to mitigate its supply chain's hazardous chemicals, carbon, or other greenhouse gas
emissions.

Apart from the use of a few eco-friendly products here and there, there is no evidence
that the company is taking any real steps to decrease its significant environmental effect.
SHEIN is putting up little effort in the areas of dangerous chemicals, carbon emissions,
and microplastics. Furthermore, by simply existing, firms that mass-produce such cheap,
poorly made apparel foster a throwaway fashion culture.

SHEIN's environment rating is 'very poor'. It has fast fashion traits such as on-trend styles
and regular new arrivals. It uses few eco-friendly materials. There is no evidence that it
has taken meaningful action to reduce or eliminate hazardous chemicals. There is no
evidence it reduces its carbon and other greenhouse gas emissions in its supply chain.
There is no evidence it has a policy to minimize the impacts of microplastics.
Its labor rating is 'very poor'. None of its supply chains is certified by labor standards that
ensure worker health and safety, living wages, or other labor rights. It received a score of
0-10% in the 2021 Fashion Transparency Index. There is no evidence it implements
practices to encourage diversity and inclusion in its direct operations or supply chain.
There is no evidence it ensures payment of a living wage in its supply chain. It does not
disclose adequate policies or safeguards to protect suppliers and workers in its supply
chain from the impacts of COVID-19.

Its animal rating is 'not good enough. There is no evidence it has the policy to minimize
the suffering of animals. It uses wool and exotic animal hair. It does not use leather, fur,
down, angora, or exotic animal skin. There is no evidence it traces any animal products to
the first stage of production.
 SHEIN is rated 'We avoid' overall.

SHEIN’s Claims About Sustainability

SHEIN claims to be “ISO certified.” ISO is a set of standards covering the quality, safety,
and environmental impact of production processes. Again, this sounds promising, but it’s
just a sham.
There are different ISO standards, some of the most popular being ISO 9001 and ISO
14001. You cannot just be “ISO certified.” ISO themselves tells you not to say this. ISO
themselves does not issue any certifications, and they ask that you find an accredited
certification body.

SHEIN also lists the following environmental measures:

 Limited quantity: They claim to produce in “small quantities” of 50-100 “which

reduces waste.” The language is ambiguous again. Do they mean 50-100 pieces
total per style? Or 50-100 pieces at a time? Even if it were the former, that’s still
an unsustainable scale if you have thousands and thousands of items on your
website.

 Advanced digital screen printing: I could not find an unbiased source about
the sustainability of digital screen printing, but it does seem to be less harmful
than regular screen printing. Even so, SHEIN does not state how much they use
this method. They simply say they “have begun using an innovative Digital
Printing technology to print graphics and patterns onto fabrics.” This could be a
super small percentage!

 Recycling program: SHEIN offers clothes recycling at college pop-up events,

and participants get SHEIN gift cards. I see recycling programs as a form of
greenwashing when fast fashion companies implement them without other real
sustainability measures. Recycling can be used to alleviate guilt for
overconsumption—if your clothes are recycled, you can just buy some more,
right? SHEIN also is not transparent about what is happening to the clothing. How
 much of it is recycled or resold? What is it being recycled into? I wouldn’t be
surprised if it just ended up being trashed.
 
The Problem
The fast fashion industry is the second most polluting industry, topped only by the oil and
gas industry. Fast fashion is responsible for 20% of global wastewater and 10% of carbon
emissions. The amount of water and energy necessary to produce millions of pieces a
year is unquestionably high. Even if Shein established (or has established) steadfast
procedures to reduce waste and energy consumption, it is impossible to be sustainable
with such a high production rate. In other words, Shein is inherently unsustainable.
Shein claims to be sustainable but fails to cover info about many other more important
environmental practices, including

 Materials: brands should opt for organic, natural, or recycled materials. SHEIN
clothing is largely made of virgin synthetics like polyester, which are made from
plastic and fossil fuels.

 Dyes: Many dyes are toxic to humans and the environment. Truly sustainable
brands will be Oeko-Tex certified to ensure that the clothes are free of harmful
chemicals.

 Animal products: The company’s website states it has a “strict no-animal

policy,” meaning no animal products or animal testing (which we love to hear).
The company says it only uses faux fur and faux leather, and it prohibits animal
testing on its products. But no proof from the company's side leaves one with no
reason to trust the company's claim. It does not look like SHEIN uses any leather
or fur, but they do have down jackets, and they have no certification for
responsible down (and no non-synthetic or recycled vegan alternative). Their fake
leather and fur are also virgin synthetics (PU leather is made from plastic)

 Water and textile waste: does the brand recycle water in the production
process? Do they use low waste cutting techniques?

 Quality: are the clothes made to last? Many of SHEIN’s pieces fall apart after just
a few wears.

 Packaging: Shein’s packing materials have also been a discussion point online.
Each item is individually wrapped in a plastic zip-top bag. With thousands of
items being shipped out a day, that’s a lot of plastic waste being sent to
landfills
  Shipping: As for shipping, the majority of the products are sent out from
warehouses in China, which has a hefty carbon footprint. Currently, China is the
world’s largest emitter of greenhouse gasses, with more emissions than all of the
developed nations combined. While the United States is Shein’s largest market, it
ships out to 220 countries in total.

The company claims to use recycled materials when possible, technology requiring less
energy consumption, and a recycling program to incentivize a more circular industry.
Again, these practices sound great, but the lack of true transparency leaves room to
wonder what those statements mean.

SHEIN’s Claims About Ethics

We treat all our employees like family by providing industry leading working conditions.
From offering above average salaries and benefits, to building state-of-the-art factories
and offices, we make sure everyone can work in a safe, clean, happy and productive
environment.

We are also proudly in compliance with strict fair labor standards set by international
organizations like SA8000.

They go on to list some of their policies, such as:

 no child or forced labor

 a safe working environment
 paying a living wage
 no harassment or abuse
 unannounced, independent audits

The Problem
These are standards used by fair labor organizations across the fashion industry,
including SA8000, which is well-respected factory certification. That said, notice the
wording here. They don’t say their factories are SA8000 certified. They just say they’re
in compliance with it. As a result, these claims really don’t mean anything, as no
independent body has confirmed them.
It’s important to note that not every brand can afford to get certified, but SHEIN is a big
enough corporation that it has the resources to get certified, if it were actually ethical. The
policies they list are great, and they’re ones we’d expect from an ethical brand—the
problem is that they have no one to back them up on these claims.

Beyond that, SHEIN has been known to steal designs from independent creators. They
have also come under fire for selling Muslim prayer mats as home decor and a swastika
necklace. The swastika controversy divided a lot of people, as it was actually rotated in
the way originally used by Hindus, Buddhists, and Jains.

Shein in 2021 was also accused of violating Chinese labor laws. A report by Swiss
watchdog group claimed that workers are forced to work 12 hours a day, working about
75 hours a week, and only received one day off a month whereas according to Chinese
labor laws workweeks cannot exceed 40 hours, and overtime cannot exceed 36 hours
per month. Workers must also receive one day off per week . 

Impact on Key stakeholders

In its latest move to keep up with growing business and fashion expectations, Chinese
retailer SHEIN recently hired a head of environmental, social, and governance
(commonly known as an ESG officer in the industry).

Sounds promising, but: On the surface, companies hiring ESG officers and similar roles
is a positive move. But it’s the ultra fast fashion brand’s attempt to portray itself as
“concerned” with sustainability when its entire business model is built on labour and
environmental exploitation that makes this announcement ring hollow.

Impact on the Company:

When a company like shein is held responsible for greenwashing this have a tarnishing
impact on the company’s image. With more number of people wanting environment
friendly options, company’s duty is to take appropriate measures to opt the environment
friendly options failing in which could result in boycott of the brand.
Losing Investors Trust:
In order to have the faith of shareholders and investors in the company, it is important
that the company reinforces the vision from time to time. In this way, CSR presents a
great opportunity. But failure towards it might make the investors skeptical and doubt the
firm’s accountability and social responsibility. Consequently, investors' funds in the
company will get affected in the long run.

Key learnings and recommendations:

 Focus on root cause
Businesses who take social responsibility seriously can win customers as well as
build a platform for marketing and gaining the attention of their target audience.
Shein should back their claims of CSR by providing information to its customers.
Shein should address the existing issues and work towards them.

 Align CSR activities with needs of the community

We learnt that when the sole focus of CSR is to achieve corporate strategy, it
would fail. It is important that the company aligns the activities of CSR towards
the needs of the community and helps foster sustainability at grassroot level.

 More discussion- more awareness

Due to shifting global viewpoints, firms are increasingly recognising the need of
sustainability. It is becoming increasingly important for businesses to bridge the
knowledge-to-action gap by embracing sustainable business strategies. Companies
that claim to be sustainable frequently fall short when it comes to implementation.

 Avoid empty claims

It was noticed that, in their Sustainability and Social Impact Report, Shein had
mentioned a lot of claims, with no data or evidence to back the claims with. This
leads to speculations among consumers as the legitimacy of their commitment to
sustainability

Pledges:

Ayush Jain: I pledge to implement the Reduce, Reuse, Recycle strategy towards
resource utilization. I vow to reduce paper consumption, use reusable bags, and recycle
the old products. I will commit to consume things which can be recycled and reused and
contribute towards Sustainable Development Goals. I also pledge to end hunger, achieve
food security and improved nutrition. I pledge to encourage citizens to not waste food
and support under-served people by feeding them

Akshat Khandelwal: I pledge to guide underprivileged students who seeks a good life in
the future to make an action plan for them in which I will recommend them future
actions, provide them with some resources as per my capacity so that they can decide a
goal and career path for them and move forward in right direction to achieve them.

Aditya Verma: I pledge to spread awareness among people so that people start valuing
water as a limited resource and use it scarcely and save it for the future generations. I also
pledge to make underprivileged people aware about the cons of open defecation and
would tell them about the benefits of general sanitation practices.

Bandaru Hanshita: I pledge to work towards ensuring gender equality in the

organizations that I will be part of by scrapping the social norms attached with different
genders and treating people on the basis of skill, talent and passion.

Deval aggarwal: I hereby pledge to help those in need with their education needs in an
inclusive and equitable manner. I pledge to publicly promote high-quality education, to
lead by example, and to hold myself accountable for demonstrating inclusive behaviors.

Anuj Singh: I pledge to educate and enhance awareness about road safety by trying to
follow safety precautions by myself and will also make sure that people around me
whether known or unknown should also follow the guidelines. This I think is
important as one mistake made in the road can affect multiple lives