The UK Financial Conduct Authority (FCA) is taking extra time to assess Shein’s proposed London stock market listing due to supply chain concerns and legal risks tied to the company’s operations. This delay comes amid growing scrutiny from NGOs and government bodies over Shein’s labour practices and governance.
Shein, a Singapore-based fast-fashion giant valued at $66 billion, has faced accusations of using cotton sourced from China’s Xinjiang region, where human rights groups allege widespread forced labour. The advocacy group Stop Uyghur Genocide (SUG) filed a legal challenge in June, urging the FCA to investigate Shein’s supply chain practices. The group also submitted a dossier in August outlining their concerns.
Shein denies these allegations, citing its zero-tolerance policy on forced labour and its use of isotopic testing by Oritain to verify cotton origins. In a sustainability report published in August, the company reported no cases of forced labour in 2023 and two instances of child labour within its supply chain, both of which it claims were resolved.
The FCA must ensure Shein’s governance and disclosures meet strict requirements, particularly as NGOs like SUG threaten judicial review if the IPO is approved. Legal experts note the FCA is not obligated to assess evidence provided by NGOs but must be prepared for litigation in case of compliance concerns.
Lucy Blake, a partner at Jenner & Block, highlighted that regulators face increasing scrutiny from well-funded activist groups, adding complexity to IPO approvals. This has been exacerbated by pressure from the Labour government to end the UK’s IPO drought and create a more business-friendly environment.
The Independent Anti-Slavery Commissioner has also raised red flags, warning that allowing Shein to list on the UK market could signal an implicit endorsement of poor labour practices. In a letter to the Home Office and Department for Business, Commissioner Eleanor Lyons called for a cautious approach, emphasizing the need to balance business attraction with human rights accountability.
While the UK’s Modern Slavery Act governs corporate practices, incoming EU regulations and the Uyghur Forced Labor Prevention Act in the US impose stricter standards. Shein will need to navigate these regulatory frameworks as part of its global compliance strategy.
Rachel Reeves, the UK’s Shadow Chancellor, has urged the FCA to adopt a growth-focused regulatory approach to support innovative firms entering the market. However, the FCA must also ensure Shein’s prospectus fully discloses any risks, particularly given the likelihood of legal challenges.
For Shein, the outcome of its IPO will hinge on how the FCA addresses governance and supply chain concerns. If approved, the company must navigate potential reputational and legal risks tied to allegations of labour exploitation.
