Shein desires to show that quick trend will be sustainable and plans to cut back emissions by 25% by 2030
- September 29, 2022
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Company discloses ESG targets to the market this Wednesday; most of the objectives concern environmental criteria
the fashion retailer Shein grew and appeared in recent years. Valued at more than US$ 100 billion and with investors such as General Atlantic, Tiger Global Management and Sequoia Capital China, the company has a fast production chain, which allows it to put 10,000 new products on sale per month. Despite the success with investors and the Brazilian public, the company still faces questions in the face of public opinion when it comes to ESG. With an eye on improving perceptions in this regard, the fashion retailer took some relevant steps in 2022. The first was the Sustainability Report, released at the beginning of the year, and now the company announces a set of goals for the future. Generally, By 2030, the company wants to reduce total emissions in its value chain by 25%.
The projection came from a study carried out with Intertek, a leading company in the field of audits and certifications, to measure the carbon footprint impact. Based on this work, the company has broken down the general goal into three objectives, to be achieved by 2030. All of them have already been submitted for validation by the Science Based Targets (SBTi).
The first concerns emissions from scope 1, which account for less than 0.05% of all the company’s. For 2030, the goal is to reduce them by 42%. The second has to do with emissions of scope 2 (of energy use), which also account for a tiny part within the overall picture (less than 0.5%). Within them, the focus is to transform the company’s entire energy use from renewable sources over the next eight years. Finally, emissions from scope 3those generated by the supply chain and which account for 99%, should be reduced by 25% by 2030.
On the way to meeting these goals, the company will invest up to US$ 7.6 million in project financing from the Apparel Impact Institute (Aii), with an eye on building an emissions reduction plan within the company’s supply chain. The company in question is a Non-Governmental Organization dedicated to promoting the decarbonization and sustainable modernization of the fashion industry.
The money will go towards two NGO initiatives: Carbon Leadership, focused on assessing and setting carbon targets, and Clean by Design, which helps textile production facilities reduce energy, water and chemical use. It will be up to Aii to define a strategy focused on the implementation of energy efficiency projects in more than 500 partner facilities of Shein – working together should generate a 10% reduction in emissions per year, according to the estimates of the Chinese company.
The fashion retailer also began working with Brookfield Renewable Partners, a leading global renewable energy and decarbonization company, with an eye on increasing consumption of renewable sources. Today, the company is one of the largest owners, operators and developers of renewable energy in the world, with hydro, wind and solar assets in North, South America, Europe and Asia.
What the company is already doing
The targets come just months after the company released its approach to the ESG criteria. In the report released earlier this year, Shein stated that it identified three pillars to act sustainably and with social impact: protecting the planet, supporting communities and strengthening entrepreneurs.
Still on the first point, the “E” of the acronym, the company works with the NGO Soles4Souls, to which it donates approximately 10,000 pairs of shoes a year in the United States. The company also claims that it is migrating production to more sustainable materials and that it will increase the supply of materials from certified suppliers. The use of recycled materials is also increasing. Other NGOs he works with are Ecologi and IFAW.
The document sent to Exame Invest this week does not mention any goals related to the social side or working conditions. What you can know, based on the previous report, is that today, the company has about 10 thousand employees worldwide, 58% of whom are women and 40% of them in senior management positions. Which does not mean that no steps have been taken. The most concrete initiatives related to these criteria have to do with the signing of the Global Compact, a UN initiative that targets both the environment and human rights-related goals.
Regarding the social impact on the surroundings, there are clearer goals disclosed in the previous document. THE The-Light-A-Wish Campaign is described as one of the main philanthropic activities for the year 2021, through which Shein managed to donate more than US$ 500 million to social projects.
Finally, looking towards the goal of empowering entrepreneurs, the company launched in January Shein X, an incubator that provides operational and financial support to designers. In 2021, 1,500 professionals were supported by this initiative and, for 2022, the goal is 3,000.
In the sustainability report, Adam Whinston, global head of ESG, says that these are the first steps for the company to be able to communicate clearly with stakeholders over the next few years. And that additional information will be released as new initiatives are implemented. What the company makes clear, at least at this first moment, is that most of its efforts will be directed towards the environmental impact of the production chain. It is not without reason. A Bloomberg article published in July already pointed to sustainability criteria as one of the main obstacles to the company’s IPO plans, based on the thesis that the clothes sold would be fragile and, therefore, frequently discarded.
On the side of working conditions — a point widely mentioned when the company’s name comes up — there are still no further details on goals or other clarifications, at least for now. It even seems that Shein wants to break the taboo that “fast fashion” is far from sustainable, first of all. Investors are certainly looking forward to it.