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Assessment Title Shein IPO Challenges Consultancy Report

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Contents
Executive Summary.....................................................................................................................................3
Introduction.................................................................................................................................................4
US IPO Challenges Faced by Shein...............................................................................................................6
Purpose of the report..................................................................................................................................7
Impact of Research on Stakeholders............................................................................................................8
Connection and Impact on Stakeholders.....................................................................................................8
Evaluation of Impact on Stakeholders.........................................................................................................9
Evaluation and Analysis with Secondary Data............................................................................................11
PEST Framework....................................................................................................................................11
Carroll’s Pyramid Framework.................................................................................................................16
Recommendations and Conclusions..........................................................................................................19
Recommendations.................................................................................................................................19
Conclusion.............................................................................................................................................22
Bibliography...............................................................................................................................................23

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Executive Summary
Shein, the Chinese e-commerce giant, embarked on a strategic move to file for a U.S.

IPO in November 2023, with aspirations to transform into a global powerhouse valued at $66

billion. Despite being a major player in the global fashion industry, Shein's IPO plans

encountered formidable challenges, primarily stemming from allegations of forced labor in its

supply chain, mainly sourcing materials from China's Xinjiang region. This issue gained

prominence as regulatory bodies, such as the House Select Committee on the Chinese

Communist Party and the Cyberspace Administration of China, initiated investigations, unveiling

concerns about exploiting tariff law loopholes and scrutiny from U.S. and Chinese regulators.

The geopolitical tensions between the U.S. and China further complicated Shein's efforts to

position itself as a global entity. This comprehensive report aimed to analyze the challenges

impeding Shein's IPO aspirations, focusing on forced labor allegations, geopolitical

complexities, and scrutiny faced by Shein's Chinese listings.

The impact of Shein's IPO challenges and forced labour allegations extended across a

spectrum of stakeholders. Top management and major shareholders, including JAFCO Asia, IDG

Capital, Sequoia Capital China, and Tiger Global Management, faced a threat to financial gains.

At the same time, the company's ethical practices directly affected factory workers and sales

workers. The customer base, consisting of young, fashion-conscious consumers, demonstrated

high sensitivity to ethical concerns, potentially leading to a shift in loyalty if the company failed

to address these issues adequately. External stakeholders, such as China's Cyberspace

Administration, China Securities Regulatory Commission (CSRC), Shein's manufacturing

partners, and the U.S. Securities and Exchange Commission (SEC), played pivotal roles in

determining the fate of Shein's IPO, tying the company's success to regulatory approval and

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compliance with legal standards. The critical evaluation revealed the complex nature of the

challenges, tarnishing Shein's brand image and reputation and emphasising the need for proactive

measures to regain trust and credibility.

Recommendations were proposed to address the identified issues in light of the

evaluation. Strengthening ethical responsibilities was seen as paramount, involving transparency,

third-party audits, and collaboration with ethical organizations to ensure a supply chain free from

forced labour. Ensuring legal compliance required a thorough review of supply chain practices

and cooperation with regulatory bodies for transparent communication. Addressing political

challenges through ethical sourcing practices was another crucial factor, emphasising the need

for proactive measures to navigate complex international relations, trade policies, and regulatory

scrutiny. Based on Carroll's Pyramid of Corporate Social Responsibility and the PEST

framework, these recommendations aimed to address the forced labour allegations and contribute

to Shein's overall ethical standing, securing a successful IPO and safeguarding its future in the

competitive retail market.

Introduction
Shein, a Chinese e-commerce giant, has carved a significant niche in the global fashion

industry since its inception in 2012. Known initially as SheInside, the company rebranded to

Shein in 2015 and has rapidly become the world's largest e-commerce-only fashion retailer,

boasting a valuation of over 100 billion U.S. dollars (Statista, 2023). With a commitment to

providing affordable and accessible fashion, Shein has attracted millions of consumers

worldwide and gained immense popularity through social media platforms like TikTok,

Instagram, and YouTube.

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 Shein's strategic move towards a U.S. IPO, with a reported valuation of $66 billion,

encounters substantial hurdles stemming from allegations of forced labor in its supply chain,

notably sourcing materials from China's Xinjiang region (‌Fonrouge, 2023). This issue gained

prominence as the House Select Committee on the Chinese Communist Party initiated an

investigation into Shein's supply chain practices, probing the sourcing of cotton and other

materials from Xinjiang. The scrutiny revealed concerns that Shein's products might exploit a

tariff law loophole, allowing entry into the U.S. without proper scrutiny (Fonrouge, 2023).

Additionally, the Cyberspace Administration of China conducted a security review, adding

another layer of complexity to Shein's IPO plans by subjecting the company to Chinese

regulations (Bosa, 2024). Adding further complexity to Shein's IPO plans is the geopolitical

tension between the U.S. and China, with regulatory bodies scrutinizing the company's

operations on both fronts (Bosa, 2024). The House panel's findings indicate the potential

exploitation of a tariff law loophole, allowing Shein's products to evade proper scrutiny, further

complicating its market entry strategy.

This report is structured to comprehensively examine the challenges impeding Shein’s IPO

aspirations. The ensuing sections will evaluate Shein’s current challenges, including forced

labour allegations, the geopolitical complexities, and the scrutiny Shein’s Chinese listings face.

The purpose of the report will be identified. Subsequently, a stakeholder analysis of both internal

and external stakeholders will be done, using a Mendelow matrix of power and interest, then a

detailed critical evaluation will follow, using secondary data to fully understand the implications

and generate recommendations and conclusions will emerge from the findings, providing

actionable insights for Shein to navigate these challenges successfully, thereby answering the

purpose of the report.

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US IPO Challenges Faced by Shein
In November 2023, Shein confidentially filed for U.S. IPO with China Securities

Regulatory Commission (CSRC), aiming to transform from a fast-fashion giant into a global

powerhouse with a reported valuation of $66 billion. The company, which manufactures most of

its merchandise in China, has been eyeing a U.S. IPO for at least three years. The IPO is a

strategic move for Shein to transform from a $5 T-shirt company into a global powerhouse

(‌Fonrouge, 2023). However, the IPO plans are facing significant challenges, primarily centered

around allegations of forced labor in Shein's supply chain, mainly sourcing materials from

China's Xinjiang region. The forced labor issue came to the forefront as the House Select

Committee on the Chinese Communist Party initiated an investigation into Shein's supply chain

practices. The committee probed the sourcing of cotton and other materials from China's

Xinjiang region, where evidence of genocide, torture, and forced labor against the Uyghur ethnic

group has raised concerns globally (Meisenzahl, 2024). The House panel's investigation revealed

concerns that Shein's products could enter the U.S. through a tariff law loophole, de minimis,

exempting packages valued under $800 from import duties and extensive customs scrutiny

(Fonrouge, 2023). In 2021, the U.S. banned the import of cotton and other products from

Xinjiang. Still, Shein's shipping model, which involves direct shipment to American consumers,

may exploit a tariff law loophole, allowing products to evade proper scrutiny (Fonrouge, 2023).

Despite Shein's claims of a "zero-tolerance policy for forced labor" (Or and Rockeman,

2023), investigations revealed positive test results for unapproved regions, raising concerns

about the company's supply chain practices. Testing conducted by Oritain, a third-party supply

chain firm, affirms these allegations. Between August 2022 and November 2023, Oritain

conducted 2,762 tests on Shein's yarn, fabric, and finished products, revealing that 1.7% tested

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positive for cotton from unapproved regions, specifically Xinjiang (Fonrouge, 2023). This data,

coupled with Shein's acknowledgment of the presence of Xinjiang cotton in its raw materials,

intensifies concerns about labor practices in the company's supply chain. U.S. lawmakers,

including U.S. Representative Jennifer Wexton, have raised these concerns, demanding proof

that Shein's products are not sourced from forced labor. Furthermore, the Cyberspace

Administration of China conducted a security review of Shein, focusing on the company's

information handling in its supply chain. This review adds another layer of complexity to Shein's

IPO plans, as it positions the company as subject to Chinese regulations, potentially impacting its

ability to go public without Beijing's approval. Amidst the growing tensions between the U.S.

and China, Shein's efforts to portray itself as a global entity face challenges as regulatory bodies

scrutinize its operations (Bosa, 2024).

The impact of forced labor allegations and review extends beyond the ethical realm,

significantly tarnishing Shein's brand image and reputation. The investigation by the House panel

and ongoing scrutiny from lawmakers raise serious concerns about the company's commitment

to ethical business practices. With mounting pressure and a critical evaluation of its supply chain,

Shein faces delays in its IPO plans and a need to address these challenges to regain trust and

credibility (Bosa, 2024). The forced labor issue, labor practices, and ties to China present a

multifaceted challenge that Shein must navigate to secure a successful IPO and safeguard its

future in the competitive retail landscape.

Purpose of the report

The purpose of this consultancy report is to evaluate how current IPO challenges might

impact Shein in China. The report will recommend how Shein would resolve their forced labor

allegations to prevent future IPO challenges

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Impact of Research on Stakeholders
Internal Stakeholders

Top Management of Shein

Shareholders: JAFCO Asia, IDG Capital, Sequoia Capital China, Tiger Global Management

Factory Workers and Sales Workers

External Stakeholders

Customers (young, fashion-conscious consumers aged 25 to 34 years old)

China's Cyberspace Administration

China Securities Regulatory Commission (CSRC)

Shein's Manufacturing Partners (e.g., Quanzhou Youfan Import and Export Trading Company)

Collaborative Partner: Queen of Raw

U.S. Securities and Exchange Commission (SEC)

Connection and Impact on Stakeholders

Shein's IPO challenges and the forced labor allegations directly impact various

stakeholders. For the top management and major shareholders, the success of the IPO is crucial

for financial gains, making it imperative to address the forced labor concerns promptly. Factory

and sales workers are directly affected by the company's ethical practices and may face

repercussions if the allegations persist. Customers, the lifeblood of Shein, are sensitive to ethical

concerns and may shift loyalty if the company fails to address these issues adequately.

Externally, regulatory bodies such as China's Cyberspace Administration and CSRC play a

pivotal role in determining the fate of Shein's IPO, tying the company's success to regulatory

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approval. Like Queen of Raw, manufacturing and collaborative partners may reconsider their

associations based on ethical considerations. The SEC represents the legal scrutiny Shein faces in

the U.S., impacting the company's ability to operate seamlessly in the market.

Shein Stakeholders Matrix

High Power, High Interest High Power, Low Interest

Top Management, Shareholders (JAFCO China Securities Regulatory Commission

Asia, IDG Capital, Sequoia Capital China, (CSRC)

Tiger Global Management), Customers,

China's Cyberspace Administration, CSRC,

SEC

Low Power, High Interest Low Power, Low Interest

Factory Workers Sales Workers

Shein's Manufacturing Partners (Quanzhou et Collaborative Partner: Queen of Raw

al. Company)

Evaluation of Impact on Stakeholders

Top Management and Shareholders (High Power, High Interest)

The success of Shein's IPO is pivotal for top management and major shareholders as it directly

influences their financial gains. The forced labor allegations significantly threaten the IPO's

success, impacting the company's valuation and investor confidence. Addressing these concerns

promptly is crucial for maintaining trust and securing financial benefits for top management and

shareholders.

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Factory Workers (Low Power, High Interest)

The ethical practices of the company directly impact factory workers. If forced labor allegations

persist, it may lead to reputational damage and potential repercussions for the workers.

Resolving these concerns is essential to ensure a positive work environment and safeguard the

well-being of factory workers.

Customers (High Power, High Interest)

Shein's customer base comprises young, fashion-conscious consumers sensitive to ethical

considerations. The forced labor allegations can significantly tarnish Shein's brand image and

lead to a shift in customer loyalty. Addressing these concerns is vital for retaining customer trust

and ensuring the brand's continued success.

China's Cyberspace Administration and CSRC (High Power, High Interest)

Regulatory bodies in China, particularly the Cyberspace Administration and CSRC, hold

significant power in determining Shein's fate in the IPO process. The forced labor allegations and

the security review impact the regulatory approval process, making Shein need to address these

issues to secure Chinese regulatory support.

SEC (High Power, High Interest)

The U.S. SEC represents the legal scrutiny Shein faces in the U.S. market. Addressing forced

labor concerns is crucial for navigating the legal landscape and ensuring compliance with U.S.

regulations. Failure to do so may lead to delays in the IPO process and potential legal

consequences.

Manufacturing Partners and Collaborative Partners (Low Power, High Interest)

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Ethical considerations may influence manufacturing and collaborative partners to reassess their

associations with Shein. Addressing forced labor concerns is essential to maintain positive

partnerships and collaborations.

Evaluation and Analysis with Secondary Data

PEST Framework

The PEST framework (Political, Economic, Social, and Technological) is a strategic tool that

helps analyze the external macro-environmental factors affecting an organization (Heubel, 2022).

We will use this framework to evaluate the business's political, economic, and social impacts in

the context of Shein's IPO challenges and forced labor allegations.

Political Factors

The political factors surrounding Shein's IPO involve a complex interplay of international

relations, trade policies, and regulatory scrutiny. It presents a significant challenge to Shein's IPO

plans, mainly due to the investigation initiated by the House Select Committee on the Chinese

Communist Party. The focus on forced labor allegations in China's Xinjiang region has escalated

political scrutiny, creating hurdles for Shein to navigate in its quest for regulatory approvals. The

House panel's concerns about Shein potentially exploiting tariff law loopholes to import products

from Xinjiang without proper scrutiny add a layer of complexity to the political landscape. This

is exemplified by the de minimis loophole, which exempts packages valued under $800 from

import duties and extensive customs scrutiny. According to a report by Fonrouge (2023), the

House panel's investigation raised concerns that Shein's products might enter the U.S. through

this loophole, thereby bypassing the ban on the import of cotton and other products from

Xinjiang imposed by the U.S. in 2021. Statistics from testing conducted by Oritain, a third-party

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supply chain firm, between August 2022 and November 2023 revealed that 1.7% of Shein's

tested yarn, fabric, and finished products contained cotton from unapproved regions, specifically

Xinjiang. This data aligns with the U.S. ban on products linked to forced labor in Xinjiang,

further complicating Shein's political landscape (Davidson, 2023). The investigation has also

triggered political responses, such as U.S. Representative Jennifer Wexton's statement urging

greater scrutiny of Shein's supply chain and the call for SEC intervention to ensure compliance

with ethical standards.

Shein has undertaken tests to address concerns about forced labor in its supply chain. The

company contracted Oritain, a supply chain tracing firm, to conduct tests on the origin of its

cotton fibers, aiming to trace them down to specific farms. Between June 2022 and July 2023,

Oritain conducted 2,111 tests, resulting in 46 positive results (a rate of 2.1%) indicating the

presence of cotton from banned regions. These tests focused on raw materials, and when a

positive result was found, Shein removed the implicated raw material from production

(‌Fonrouge, 2023). Shein's head of strategy and corporate affairs, Peter Pernot-Day, highlighted

the company's commitment to reducing positive test results to zero, implementing monthly

testing across all 40 mills and ceasing the purchase of cotton from China.

In response to the forced labor allegations, Shein has emphasized its zero-tolerance

policy for forced labor (Or and Rockeman, 2023). The company has spent $1.28 million on

Capitol Hill lobbying in an effort to shape its image and address concerns. Shein has also

engaged with lawmakers, including critics, to communicate its efforts to diversify its supply

chain away from China, citing initiatives to source more goods from countries like India

(Masters et al., 2023). Additionally, Shein has partnered with Oritain to conduct rigorous

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testing on its cotton supply chain, and according to the results, the company claims to fare better

than the industry average in terms of positive tests for cotton from unapproved regions.

Moreover, the broader geopolitical tensions between the U.S. and China further

complicate Shein's efforts to portray itself as a global entity. The ongoing U.S.-China trade

dynamics and the heightened scrutiny of Chinese companies listing in the U.S. contribute to the

multifaceted political challenges Shein must navigate. The recent regulatory crackdown on

overseas listings of Chinese companies, as exemplified by the case of Didi Global, sets a

backdrop of increased regulatory uncertainty for Shein (Bosa, 2024). The political factors

affecting Shein's IPO extend beyond U.S. borders, with Chinese regulators conducting a security

review of Shein. This adds another layer of complexity, positioning the company as subject to

Chinese regulations, potentially impacting its ability to go public without Beijing's approval.

Amid growing tensions between the U.S. and China, Shein's efforts to portray itself as a global

entity face challenges as regulatory bodies scrutinize its operations (Bloomberg, 2024).

Therefore, the political landscape influences the IPO process in the U.S. and introduces

regulatory hurdles in China, highlighting the multifaceted nature of Shein's political challenges.

Evaluation

Despite Shein's efforts to address forced labor concerns through testing, lobbying, and

diversifying its supply chain, challenges persist. The ongoing scrutiny and bipartisan calls for

verification indicate a lack of confidence among U.S. lawmakers regarding Shein's commitment

to eradicating forced labor from its supply chain. The positive test results, while lower than the

industry average, highlight the complexity of ensuring a completely clean supply chain. Shein's

lobbying activities may be seen as attempts to influence perception rather than substantively

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addressing the core labor-related issues (Masters et al., 2023). The skepticism from lawmakers

and ongoing investigations suggest that Shein has not fully convinced regulators and

stakeholders of the integrity of its supply chain practices, potentially posing obstacles to a

successful U.S. IPO.

Economic Factors

Economic considerations are pivotal for Shein's IPO success, given its reported valuation

of $66 billion and ambitions to transform into a global powerhouse. The global economic

landscape and the relationship between the U.S. and China play crucial roles in shaping Shein's

prospects in the IPO market. Bloomberg reports indicate that Shein could seek a valuation of up

to $90 billion in its IPO, making it a substantial offering in the consumer market (Fonrouge,

2023).

Crucially, the forced labor allegations pose a significant economic threat to Shein's IPO

plans. According to Bloomberg's report, Shein's IPO faces skepticism, and the controversies

surrounding forced labor may hinder the company's growth trajectory. Economic considerations

come to the forefront as investors and regulators question how Shein plans to manage challenges

unrelated to maintaining its app's dominance (Fonrouge, 2023). The economic disadvantage of

an IPO lies in increased disclosure requirements and public scrutiny, as highlighted by David J.

Kaufman. This is reflected in the skepticism expressed by U.S. lawmakers, including

Representative Jennifer Wexton, urging greater scrutiny of Shein's supply chain before the IPO.

The economic impact is not only limited to delays in the IPO process but extends to the public

offering's valuation and overall financial success.

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 According to Derek Yan, senior investment strategist at KraneShares, a China-focused

investment manager, Shein's SEC filing for its IPO may prompt detailed disclosures on

regulatory concerns and lawsuits, potentially impacting the company's valuation and investor

interest 9(Liu, 2024). The looming risks could divert management's attention away from

maintaining the app's dominance, centered on offering ultra-low-cost clothing, with prices as low

as $2 (Or and Rockeman, 2023). This scrutiny may raise investor inquiries about the company's

ability to navigate challenges beyond its core business, potentially influencing market perception

and share performance.

Additionally, economic tensions between the U.S. and China complicate Shein's

economic landscape. The ongoing geopolitical tensions could further complicate Shein's efforts

to position itself as a global entity. As Bosa (2024) report suggests, scrutinizing Shein's IPO

involves regulatory concerns about Chinese firms listing in the U.S., reflecting broader economic

and political considerations (Bosa, 2024). The economic challenges arising from geopolitical

tensions may affect Shein's ability to navigate the IPO process seamlessly. For instance, the

review conducted by the Cyberspace Administration of China, focusing on information handling

in Shein's supply chain, introduces a regulatory dimension to the economic challenges,

potentially impacting the IPO's success. The economic impact is restricted to Shein and ripples

through its network of shareholders, including JAFCO Asia, IDG Capital, Sequoia Capital China,

and Tiger Global Management, who are directly tied to the company's financial performance.

Social Factors

Shein's social factors revolve around its brand image and reputation, which are crucial for

its customer base of young, fashion-conscious consumers aged 25 to 34. The forced labor

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allegations directly impact Shein's social standing, tarnishing its brand image. Customers are

increasingly sensitive to ethical considerations, and the allegations can lead to a shift in loyalty if

Shein fails to address these concerns adequately. Representative Jennifer Wexton's vocal

criticism and the Uyghur Forced Labor Prevention Act reflect the social expectations for

companies to ensure ethical practices in their supply chains (Fonrouge, 2023). The company's

claim of a "zero-tolerance policy for forced labor" faces challenges as investigations reveal

positive test results for unapproved regions, specifically Xinjiang (Or and Rockeman, 2023). The

statistics from Shein's testing, indicating that 2.1% of its cotton tested positive for unapproved

regions, raise questions about the effectiveness of its ethical practices.

Carroll’s Pyramid Framework

Carroll’s Pyramid of Corporate Social Responsibility provides a comprehensive approach to

evaluating an organization's social responsibilities, including economic, legal, ethical, and

philanthropic aspects (Carroll, 2016). In the context of Shein's forced labor allegations and IPO

challenges, we will analyze how the Pyramid can guide resolving these issues.

Economic Responsibilities

At the foundational level of Carroll's Pyramid, economic responsibilities involve ensuring

profitability and creating value for shareholders. Shein's IPO, with its reported valuation of $66

billion, clearly indicates its commitment to economic responsibilities. However, the forced labor

allegations significantly challenge these economic responsibilities. The potential delays in the

IPO process and the impact on investor confidence directly affect Shein's financial obligations

(Fonrouge, 2023). The company's success in addressing these allegations will determine its

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ability to fulfill its financial responsibilities by securing a successful IPO and maintaining

shareholder value.

KraneShares' Senior Investment Strategist, Derek Yan, anticipates that the SEC will request

comprehensive disclosures from Shein regarding regulatory concerns and legal issues,

potentially impacting the company's valuation and investor interest (‌Liu, 2024). Yan notes that

investors may be concerned about the management's allocation of time dealing with challenges

unrelated to the platform's core focus of selling affordable clothing (Or and Rockeman, 2023). As

Shein navigates potential obstacles related to regulatory scrutiny and lawsuits, the valuation and

investors' confidence in the company's shares could be influenced.

Legal Responsibilities

Shein is currently facing intense scrutiny in the lead-up to its planned IPO in the U.S., with

Representative Jennifer Wexton, a prominent critic, urging greater examination of the company's

supply chain. Wexton, a Democrat from Virginia, has been particularly vocal, co-sponsoring the

Uyghur Forced Labor Prevention Act (UFLPA) aimed at banning products from China's Xinjiang

region. This legislation comes in response to an investigation revealing scientific evidence that

Shein's clothing contains cotton produced in Xinjiang through alleged forced labor.

Representative Wexton, along with other members of Congress, has called upon the U.S.

Securities and Exchange Commission (SEC) to mandate that Shein proves its supply chain is free

of forced labor before approving any IPO applications. Shein, in response, asserts a zero-

tolerance policy for forced labor, emphasizing that only 2.1% of its tested cotton was unapproved

(Fonrouge, 2023). Nevertheless, the company's IPO faces heightened scrutiny due to concerns

over its sourcing practices, particularly in light of the UFLPA. In response to the scrutiny

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surrounding its IPO, Shein has taken measures to defend its position. The company has

emphasized its zero-tolerance policy for forced labor and highlighted the relatively low

percentage of unapproved cotton in its supply chain (Or and Rockeman, 2023).

However, the lack of absolute assurance regarding forced labor in its sourcing processes has led

to increased skepticism and calls for more concrete evidence. The company's relocation of its

headquarters to Singapore and efforts to diversify manufacturing outside of China signify an

attempt to present itself as a global entity, addressing concerns tied to its Chinese roots (Or and

Rockeman, 2023). Yet, the ongoing legal challenges, especially those related to potential forced

labor in its supply chain, remain a significant hurdle. Shein's response may require more

transparent and verifiable documentation of its supply chain practices to alleviate concerns and

gain regulatory approval for its IPO in the U.S.

Ethical Responsibilities

Ethical responsibilities, situated at the next level, involve practices beyond legal requirements

and contributing to societal well-being. The forced labor allegations directly impact Shein's

ethical standing, with claims of sourcing materials from regions associated with human rights

abuses. The scrutiny from lawmakers, ethical supply chain firms like Oritain, and public calls for

transparency highlight the ethical challenges Shein faces (Fonrouge, 2023). Addressing these

concerns is essential for meeting ethical responsibilities and safeguarding the company's brand

image and reputation. Shein's commitment to a "zero-tolerance policy for forced labor" aligns

with ethical responsibilities (Or and Rockeman, 2023), but the challenge lies in proving the

implementation and effectiveness of such policies.

Philanthropic Responsibilities

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At the apex of Carroll's Pyramid are philanthropic responsibilities, involving contributions to the

well-being of society beyond legal and ethical obligations. Shein's philanthropic role is

intertwined with its commitment to ethical sourcing and labor practices. By ensuring a

transparent and honest supply chain, Shein can positively contribute to societal well-being.

However, the forced labor allegations create a philanthropic dilemma, requiring Shein to

demonstrate its dedication to social welfare through concrete actions, such as verified supply

chain practices that eradicate forced labor (Fonrouge, 2023).

Limitations

In evaluating and analyzing secondary data, it is crucial to acknowledge the limitations inherent

in the data collection process. Potential constraints include the lack of real-time information,

restricted access to confidential documents or proprietary databases, and reliance on publicly

available sources. Additionally, direct engagement with key stakeholders or Shein representatives

may be necessary to gain insight into the IPO challenges and allegations of forced labor.

Recommendations and Conclusions

Recommendations

Based on the evaluation of Shein's IPO challenges and forced labor allegations, the following

recommendations are proposed to address the identified issues and fulfill the purpose of the

report:

Carroll's Pyramid of Corporate Social Responsibility

Strengthen Ethical Responsibilities by addressing forced labor allegations

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 Carroll's Pyramid of Corporate Social Responsibility places ethical responsibilities as

crucial beyond legal obligations, focusing on practices that contribute to societal well-being.

Ethical responsibilities are vital in addressing the challenges and fulfilling the report's purpose in

the context of Shein's forced labor allegations. Carroll emphasizes that ethical practices

contribute to the broader social good and are essential for a company's reputation and brand

image. Shein should prioritize strengthening its ethical responsibilities to address the forced

labor allegations. Firstly, the company should enhance transparency by proactively disclosing

comprehensive information about its supply chain practices, specifically regarding sourcing

materials from Xinjiang (Fonrouge, 2023). This transparency will demonstrate a commitment to

ethical sourcing and address concerns raised by regulatory bodies and third-party firms.

Secondly, Shein should conduct independent third-party audits of its supply chain to verify

compliance with ethical standards. This proactive approach aligns with moral responsibilities and

fosters trust with key stakeholders, including customers and investors. Furthermore, engaging

with reputable, ethical organizations and NGOs specializing in labor rights and supply chain

ethics can provide expert guidance, ensuring Shein adopts and maintains best practices in its

supply chain management.

Ensure Legal Compliance by adhering to Chinese and U.S. Regulations

Carroll's Pyramid of Corporate Social Responsibility emphasizes legal responsibilities as

a fundamental aspect of an organization's ethical framework. Addressing legal compliance is

paramount in the context of Shein's forced labor allegations and IPO challenges. Carroll

emphasizes that meeting legal obligations is not only a requirement for regulatory approval but

also essential for building trust with stakeholders. To address legal responsibilities and navigate

regulatory scrutiny, Shein must ensure strict adherence to laws and regulations related to forced

Page 20 of 25
labor and supply chain practices. Firstly, a thorough legal review of the supply chain practices

should be conducted to identify and rectify potential violations, particularly regarding laws such

as the Uyghur Forced Labor Prevention Act (UFLPA) (Meisenzahl, 2024). This proactive

measure can help mitigate legal risks and demonstrate a commitment to ethical business

practices. Additionally, active collaboration with regulatory bodies, including the U.S. SEC and

China's Cyberspace Administration, is crucial (Fonrouge, 2023). By engaging in transparent

communication and cooperation, Shein can showcase its dedication to legal compliance,

contributing to a smoother regulatory approval process. Nevertheless, retaining legal counsel

with expertise in international trade laws, labor regulations, and IPO processes can provide

valuable guidance, ensuring Shein effectively navigates the complex legal landscape associated

with forced labor allegations.

Addressing Political Challenges through Ethical Sourcing

Based on the evaluation of political factors using the PEST framework, it is evident that

Shein faces significant challenges in navigating the complex international relations, trade

policies, and regulatory scrutiny surrounding its IPO plans. To address these political challenges,

Shein should prioritize a proactive and transparent approach in its supply chain management,

particularly in the sourcing of raw materials from regions associated with forced labor and

human rights abuses, such as Xinjiang. To mitigate the impact of the investigation initiated by

the House Select Committee on the Chinese Communist Party, Shein should strengthen its

commitment to ethical sourcing by implementing robust verification mechanisms for its supply

chain (Singh, 2024). This ensures that raw materials, especially cotton, are not sourced from

banned regions like Xinjiang. Additionally, Shein should enhance communication with

regulatory bodies, such as the China Securities Regulatory Commission (CSRC) and the U.S.

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Securities and Exchange Commission (SEC), providing clear evidence of its compliance with

ethical and legal standards (Meisenzahl, 2024). Additionally, Shein should communicate

transparently about its supply chain practices, demonstrating a "zero-tolerance policy for forced

labor" through concrete actions, thereby addressing concerns raised by U.S. Representative

Jennifer Wexton and the House Select Committee (Fonrouge, 2023). By aligning its practices

with ethical expectations, Shein can navigate the intricate political landscape, securing regulatory

approvals and mitigating risks associated with geopolitical tensions.

Conclusion

In conclusion, evaluating Shein's US IPO challenges and forced labor allegations

underscores the multifaceted nature of the company's hurdles. The forced labor issue,

geopolitical tensions, and regulatory scrutiny pose significant threats to Shein's IPO success. The

impact on stakeholders, including top management, shareholders, factory workers, sales workers,

customers, and regulatory bodies, highlights the urgency for Shein to address these challenges

proactively. Based on Carroll's Pyramid of Corporate Social Responsibility and the PEST

framework, the recommendations emphasize strengthening ethical responsibilities, ensuring legal

compliance, and addressing political challenges through transparent and honest sourcing

practices. By implementing these recommendations, Shein can mitigate risks associated with

forced labor allegations, enhance its brand image, rebuild trust with stakeholders, and navigate

the complex landscape of regulatory approvals, ultimately securing a successful IPO and

safeguarding its future in the competitive retail market.

Page 22 of 25
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