In a significant regulatory action that sends ripples through the global fast fashion industry, Italian authorities have fined Chinese e-commerce giant Shein €1 million ($1.1 million) for misleading consumers with dubious environmental claims. The penalty, imposed by Italy’s competition watchdog AGCM, marks one of the most substantial greenwashing sanctions against a major fashion retailer in Europe to date.
The Italian regulator determined that Shein’s “evGREEN” and “SHEIN Green” collections featured misleading environmental messaging that lacked substantiation. According to the AGCM’s investigation, Shein’s sustainability claims created “a false impression of the actual environmental characteristics” of the products, essentially deceiving consumers who were making purchasing decisions based on purported eco-friendly attributes.
“Companies can’t simply slap green labels on products without rigorous verification,” explains Giuliana Ferrero, a Milan-based retail compliance expert I spoke with yesterday. “Italian regulators are making it clear that environmental marketing must be backed by demonstrable evidence.”
The fine highlights a growing trend of regulatory scrutiny toward “greenwashing” – the practice of making misleading or unsubstantiated environmental claims to appeal to eco-conscious consumers. The European Commission has been particularly active in this area, with its Green Claims Directive aimed at ensuring companies can substantiate environmental marketing with scientific evidence.
Shein has rapidly grown into one of the world’s largest fashion retailers, with a business model built on ultra-low prices, rapid production cycles, and direct-to-consumer shipping. The company, founded in 2008, reportedly reached a valuation of $66 billion in 2022 according to data from Bloomberg, though more recent private fundraising efforts suggest a significant drop to around $40 billion.
The company’s meteoric rise has been accompanied by persistent criticism of its environmental impact. Research from the Massachusetts Institute of Technology suggests the typical fast fashion garment produces 516 pounds of carbon dioxide equivalent – roughly the emissions from driving 1,300 miles in an average passenger vehicle, according to EPA calculations.
“What we’re seeing is a fundamental clash between the fast fashion business model and legitimate sustainability,” says Marco Bertini, professor of marketing at Esade Business School, whom I interviewed for this article. “When companies like Shein release thousands of new styles weekly, the environmental math simply doesn’t add up, regardless of what materials they claim to use.”
This isn’t Shein’s first encounter with regulatory troubles. Last year, Bloomberg reported the company faced investigations in multiple jurisdictions over labor practices and customs declarations. The retailer has also faced criticism from environmental NGOs like Greenpeace, which has called out the disposable nature of fast fashion items.
In response to growing criticism, Shein has publicly committed to sustainability goals, including a pledge to reduce carbon emissions across its entire value chain by 25% by 2030. The company has also instituted a $50 million Extended Producer Responsibility Fund aimed at addressing textile waste management.
Financial data from the World Economic Forum estimates the global fast fashion market at approximately $35.8 billion in 2023, projected to grow to $122.9 billion by 2028. However, this growth faces increasing headwinds from both regulatory pressure and shifting consumer preferences.
A recent survey by McKinsey found that 67% of consumers consider the use of sustainable materials important in their purchasing decisions, while data from First Insight indicates 62% of Generation Z prefer to buy from sustainable brands and are willing to pay more for environmentally friendly products.
“The fast fashion industry is at a crossroads,” notes Valeria Molinari, sustainability director at the European Fashion Alliance, whom I consulted for perspective. “Consumers are becoming more sophisticated about greenwashing, and regulators are developing more precise tools to identify it. This creates genuine market pressure for authentic sustainable practices.”
Italy’s action against Shein aligns with a broader European regulatory trend. France, for instance, has implemented an anti-waste law requiring unsold fashion items to be reused, redistributed or recycled rather than destroyed. Meanwhile, the EU’s forthcoming Corporate Sustainability Due Diligence Directive will require large companies to identify and address adverse human rights and environmental impacts in their value chains.
The implications for investors and market analysts watching the fast fashion sector are significant. Environmental, Social, and Governance (ESG) considerations increasingly influence investment decisions, with data from Morgan Stanley indicating that sustainable investing assets under management grew 55% between 2016 and 2020.
As I’ve observed in my years covering the intersection of retail and sustainability, greenwashing penalties typically trigger three responses: immediate compliance improvements, strategic sustainability reassessments, and enhanced transparency. Whether Shein follows this pattern remains to be seen.
What’s certain is that the days of unsubstantiated green marketing claims in fashion are numbered. For fast fashion giants like Shein, the choice increasingly comes down to fundamentally reimagining their business models or facing mounting regulatory penalties and consumer backlash in markets worldwide.
