Shein’s IPO: A Tower of Growth Built on Shaky Ground
A case study in balancing market momentum with reputational risk
Shein, the ultra-fast fashion giant known for rock-bottom prices and lightning-speed design cycles, is again preparing for an IPO, this time in Hong Kong. With earlier plans to list in London reportedly delayed due to regulatory and ethical concerns, Shein’s listing journey is now under even greater scrutiny.
There’s no denying Shein’s business success. But its meteoric rise also raises the question: how do investors and stakeholders weigh financial growth against ethical and environmental concerns?
This isn’t just a Shein issue; it’s a modern investment dilemma.
What’s at Stake: IPOs and the ESG Lens
When a company launches an Initial Public Offering (IPO), it’s not just raising capital; it’s inviting public scrutiny. An IPO marks the transition from private to public ownership, bringing new obligations: transparency, regulatory compliance, and accountability to shareholders. In today’s market, that accountability goes beyond profits.
Investors, regulators, and consumers increasingly evaluate companies through an ESG lens, Environmental, Social, and Governance. ESG frameworks assess how a business impacts the planet, treats people, and governs itself. For high-growth companies like Shein, ESG is no longer a niche concern; it’s a key factor in determining long-term value, market access, and reputational resilience.
To understand why Shein draws such intense attention, we first have to acknowledge the scale and success of the business behind the brand.
The Upside: A Retail Rocket Ship
From a business perspective, Shein has been nothing short of explosive.
- Revenue reached an estimated US$24 billion in 2023, putting it in the same league as H&M and Zara.
- Its valuation, once pegged as high as US$100 billion, is now expected to range between US$30–60 billion, depending on where it lists.
- Its app is one of the most downloaded shopping platforms globally, with a core audience in Gen Z and younger millennials.
Shein’s backend is just as impressive. It has pioneered a real-time production model that reduces waste (in theory) by only manufacturing what consumers actually want. It doesn’t own factories but coordinates a vast supply network, predominantly in China, reacting to trends faster than almost any other fashion retailer.
The Underlying Risk: Growth at What Cost?
1. Labour Rights and Transparency Concerns
One of Shein’s most persistent reputational issues relates to alleged connections to forced labour and poor factory conditions.
- UK politicians and rights groups raised concerns over Shein’s general lack of supply chain transparency, leading to delays in its London IPO.
- In 2022, a UK Channel 4 documentary uncovered 14–18-hour workdays and unsafe factory environments in some supplier facilities.
While Shein has promised to improve transparency and auditing, its disclosures remain limited compared to its peers. And the issue isn’t isolated, but Shein’s visibility makes it a lightning rod.
2. Environmental Impact: The Cost of Disposability
Shein uploads thousands of new styles weekly, driving consumption and fuelling demand for disposable fashion.
- The fashion industry accounts for 8–10% of global carbon emissions, and fast fashion alone contributes around 92 million tonnes of textile waste annually (UN Environment Programme).
- A 2023 study found Shein’s CO₂ emissions were over 6 million tonnes annually, roughly equivalent to a small industrialised nation.
Unlike some competitors, Shein hasn’t made formal public commitments to circularity, emissions targets, or sustainable sourcing. While it claims to “only produce what’s in demand,” the sheer volume of clothing and its low price point suggest otherwise.
3. Regulatory and Reputational Pressure
The delayed London IPO was reportedly due to Shein’s failure to meet ESG disclosure expectations. Instead, it’s now pursuing a Hong Kong listing, which comes with lighter ESG requirements, but may not satisfy Western investors focused on governance standards.
There’s also mounting pressure in the US. A proposed bipartisan bill could close the “de minimis” loophole that allows Shein to import goods under $800 without paying tariffs or undergoing inspection. If passed, this could significantly increase costs and force changes to its logistics model.
Weighing the Pros and Cons: Growth vs Governance
For those approaching Shein from an investment standpoint, the picture is both compelling and cautionary.
On the pro side, Shein’s market cap potential, vast consumer reach, and global footprint make it an undeniable force. Its ability to dominate in Western markets while maintaining low-cost production in China gives it a scalable, high-margin model that few competitors can match. It’s also tuned into cultural shifts, from influencer-driven sales to mobile-first commerce, making it especially resilient to traditional retail downturns.
On the con side, however, the company faces persistent reputational exposure. Allegations surrounding forced labour, lack of supply chain transparency, and its environmental footprint pose clear ESG risks. These aren’t abstract concerns; they influence regulator behaviour, shape public sentiment, and can ultimately limit capital access. In today’s environment, reputational drag is a quantifiable liability, particularly for consumer-facing brands seeking global legitimacy.
The balance, then, is not just about short-term gains; it’s about how well Shein can withstand deeper scrutiny, and whether its business model is future-proof under intensifying global expectations around ethics and sustainability.
This Is Bigger Than Shein: Zara’s Case Study
To be clear, Shein is not the only fast fashion brand facing scrutiny. Its closest legacy rival, Zara (owned by Inditex), offers a useful point of comparison:
- Inditex made €35.9 billion in revenue in 2023, but also reported a 20% increase in transport emissions.
- Zara has launched a “Join Life” line, using more sustainable materials and committing to net zero by 2040, yet it still produces hundreds of millions of garments annually.
- The company’s textile recycling rate remains under 1%, consistent with fashion industry averages.
So while Zara is arguably doing more on the ESG front, it’s still operating within the same high-consumption, low-durability model. Shein may be the outlier in scale and speed, but it’s part of a much larger structural issue in the fashion ecosystem.
The Takeaway: A Public Due Diligence Moment
The Shein IPO story is ultimately not about whether it’s a “good” or “bad” company. It’s about what stakeholders, investors, regulators, and the public are willing to overlook in pursuit of profit.
- Can a business sustain long-term value if it continues to externalise social and environmental costs?
- Are ethical concerns now material risks? Or are they still being sidelined in exchange for short-term growth?
- And how should we interpret a company’s decision to list in a jurisdiction with lighter governance requirements, rather than face the scrutiny of London or New York?
These are no longer just investor questions; they’re public ones. Because in 2025, due diligence isn’t a backroom exercise, it’s playing out live, in headlines, forums, and policy debates.
It’s Not About Demonising, It’s About Decoding
Fast fashion’s challenges are real, but growing consumer and investor awareness is shifting the landscape. Nearly 70% of Gen Z and millennials prefer brands with clear sustainability commitments, pressuring retailers to adapt or lose market share.
Investors are also pushing for transparency and responsible sourcing. In 2024, major asset managers filed resolutions with Inditex on supply chain audits and emissions targets.
These forces may compel brands like Shein to evolve or risk backlash and declining valuations. Ultimately, Shein’s IPO highlights systemic risks but also the rising influence of ethical scrutiny in shaping corporate futures.
