ESG: None of This is Serious….

The title of this article was inspired by the just-published debut novel of Catherine Prasifka and my ongoing efforts to understand Generation Z a bit better. Or to question previous views? Surely, Gen Z are the one generation who are really serious about climate, sustainability, ESG etc? I would have taken that assumption as accepted wisdom until I read about a company this week which almost nobody over the age of 30 has ever heard of. Let’s tweak your curiosity with some data points which are truly mind-blowing before revealing the company’s name…

  • This company was established in 2008 and is about to complete a private funding round which will value it at circa $100 billion. That’s a bit more than Stripe….but it’s not another fintech.
  • Originally, the company made wedding dresses but has moved into fast fashion and is worth more than the global giant Inditex/Zara and H&M franchises combined.
  • The company is on track to do $20 billion of annual sales in 2022 and does NOT own a single retail store. As recently as 2020 (and pre-pandemic) the franchise was valued at $15 billion.
  • On an average day, the company adds 2,000 new items to its e-commerce store and ships its products direct to consumers in 220 countries.
  • This franchise does NOT sell to China.
  • The company’s app has overtaken Amazon as the top shopping app in the US and has almost 350 million downloads worldwide.
  • The fashion items sold are insanely cheap(many product lines are under $10) and timing from design/trial to wider market is just 5-7 days (vs Zara 3 weeks).
  • A super-powerful market intelligence operation and the latest data science/algorithms are combined with tightly controlled supply chains to ramp-up production almost instantly when the initial smaller batches of product show promise.
  • Then a TikTok army of video contributors, influencers(Katy Perry, Rita Ora, Addison Rae etc) and participation incentives creates a viral flywheel of more users, better data and better products which, in turn, generate more users and engagement.
  • US upper-income teens now view this company as the number 1 fashion e-tailer, and the number 2 shopping platform nationwide behind Amazon.
  • The consumer surveys are consistent – Gen Z’s favourite clothes shopping place is an online platform so…..

Cue the drum roll and the big reveal; it’s Shein (pronounced She-in) and it’s…..Chinese based and owned. Yes, the combination of speed/freshness, style/influencer and, critically, affordability are the unsurprising behavioural drivers for the Shein+Gen Z love-in but, but …. what about the “purpose driven” younger generation and their sustainability anxieties? Specifically, and leaving aside the awkward question of Chinese ownership, I would have thought the following issues merited pause for thought….

  • Information on Shein’s secretive supply chains and production facilities is very limited and has ensured Shein’s positioning at the bottom of most ESG/sustainability rankings. Think labour conditions, safety, wages etc
  • Then think about a franchise whose marketing model is designed to generate turnover, fresh demand, obsolescence, waste etc. The fashion industry in aggregate is already responsible for 10% of carbon emissions and consumes 100 million tonnes of oil annually. Fast fashion is hardly a sustainability poster child, and Shein is not helping in a world where the average consumer throws away 60% of new clothes in the same year they were bought.

Awks, but maybe we should save our ESG/sustainability queries for the institutions and private equity houses funding Shein. It was striking in this week’s Irish Times interview with the young novelist Prasifka that the context, in her words, to writing about twenty somethings is that “it feels like there’s no real way to acquire assets or money or political power or stability”. My personal view is that this touches quite profoundly on why we misunderstand Gen Z behaviours. If the current external world is not exactly screaming opportunity, stability or control why wouldn’t a younger person go down the crypto or NFT rabbit holes, or expand their digital lives in the metaverse, or change their clothes or Web3 avatars on a frequent basis? Seems pretty human. But I do hope Gen Z  don’t give up on this world and its current leadership generation….

It is easy for us to query the sustainability of Shein in the life of a purpose driven twenty something but there is a far bigger ESG leadership question right now. And without a convincing answer, it’s possible many of our brightest and youngest will conclude None of This ESG stuff is Serious. So, let’s ask that question. Will Europe stop buying gas to fund Russian death squads in Ukraine? Seems pretty human too.

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