Regulatory Risks in E-commerce: Shein and the EU's Push for Ethical Compliance

Shein, the Chinese fast-fashion giant with a dominant presence in the EU market, has already begun allocating resources to meet regulatory demands. According to a report by Reuters, the company has earmarked $15 million for 2025 to increase product safety testing, aiming to conduct 2.5 million tests this year alone. This follows a European Union probe into its practices, which highlighted concerns over product quality and environmental compliance. Additionally, Shein has established a "Business Integrity Group" to bolster internal governance and audit capabilities, a move directly tied to addressing regulatory and political risks in Europe.

The EPR framework, which requires producers to fund textile waste management, adds another layer of complexity. While Shein has not disclosed specific figures for EPR compliance, its $50 million annual Extended Producer Responsibility Fund has been criticized as insufficient relative to its revenue and the scale of the industry's waste problem. This fund, intended to cover collection, sorting, and recycling costs, is seen by critics as a minimal investment compared to the €6–7 billion estimated to scale EU recycling infrastructure by 2030.

The long-term financial impact of EPR and ESPR on Shein and its peers is poised to be profound. By 2030, the EU aims to achieve a 50% separate collection rate and a 20% preparation for re-use rate of textiles, with even more ambitious targets by 2035. These goals necessitate a redesign of production models toward durability, recyclability, and circularity-shifts that demand significant capital investment. For Shein, which relies on low-cost, high-volume production, the transition could lead to margin compression as compliance costs rise.