Shein Launches €200 Million Fund for Circularity: Sustainable Fashion in Focus

Shein, the online fast fashion group aiming for a London stock exchange listing, announced the launch of a €200 million circularity fund. According to Chairman Donald Tang, this initiative is intended to address the waste problems in the fashion industry and to allay recent concerns about the brand’s sustainability. The China-founded company plans to invest the funds as soon as possible in startups and established companies in the United Kingdom and Europe, Tang told the Financial Times. "Our financial resources, our scale, and leverage mean that we can and will play a significant role in the application of these technologies or processes," he said. The planned investment represents only a fraction of Shein's $2 billion profit for 2023. The e-commerce company, which has been rapidly catching up to major fashion retailers like Zara and H&M following a boom during the pandemic, was valued at $66 billion in its last funding round. Investments could flow into young firms working on recycled materials or into more mature companies whose existing processes utilize new or emerging fabrics to become more sustainable. This move comes amid Shein’s efforts to publicly list its shares in London after abandoning a planned IPO in New York. The company has been entangled in tensions between the US and China and faced allegations of involvement in forced labor in the Chinese region of Xinjiang. Shein has denied these accusations, stating that it follows a zero-tolerance policy towards forced labor. Shein, which is headquartered in Singapore but maintains most of its operations and supply chains in China, is also considering an emergency plan for a listing in Hong Kong, the FT reported earlier. Tang declined to comment on the listing process, which, regardless of its location, requires approval from the China Securities Regulatory Commission. When asked whether the fund was a response to criticism and concerns about its extensive supply chain, Tang said it was a "continuation of the efforts and path we have been pursuing for some time." Fast fashion companies like Shein are under scrutiny from activists who argue that their rise has led to an unprecedented amount of cheap, low-quality fashion ending up in landfills. According to the Ellen MacArthur Foundation, a nonprofit organization fighting waste and pollution, more than half of fast fashion is disposed of in less than a year. Shein stated that its on-demand business model requires fewer inventories than traditional retailers. Tang said that the problem of fashion waste "cannot be solved individually" and that it "is not just about money." "It is too big, it needs collaborative efforts," he said, calling on others, including rival retailers, sovereign wealth funds, investors, policymakers, nonprofit organizations, and academics, to join the circularity initiative. Last month, Shein submitted confidential documents to the UK market regulator, bringing the company one step closer to a potentially groundbreaking stock listing for London’s rather lackluster capital market. Shein had a meeting with the new Business Secretary Jonathan Reynolds before the last parliamentary election, in which the Labour Party achieved a landslide victory. Labour had previously said that London should welcome a Shein IPO as it would be subject to higher regulatory standards than elsewhere. The company also announced on Tuesday an additional €50 million investment in brands, designers, and artisans in the UK and the EU that collaborate with Shein, as well as potential investments in research and development or a pilot factory in Europe or the UK. In 2022, Shein launched a resale platform for clothing in the US, which is now also available in the UK and Europe, with more than 115,000 listed used items.