The e-scooter and e-bike rental industry is grappling with significant ESG risks, driven by regulatory challenges, financial instability, and safety concerns.

Lime, Bird, and Voi face challenges in environmental sustainability, particularly regarding waste management and scooter lifecycles. They also deal with social risks, such as accidents and legal issues related to safety, prompting cities like Madrid and Paris to impose bans or regulations. Regulatory compliance remains difficult, as seen with Voi's license revocations in Brussels. Additionally, Bird filed for bankruptcy in 2024 amid financial struggles, reflecting broader industry issues.

To top it off, the industry is also under pressure to adopt more responsible governance practices, including addressing labor conditions, consumer rights, and transparency in operations.

What are the most pressing ESG challenges currently facing the electric scooter rental sector?
Read to find out.

Lime: Confronting Safety, Legal, and Environmental Challenges

Lime has faced significant ESG risks, including scrutiny over safety and maintenance issues related to its scooters, which have resulted in lawsuits and fines from local authorities like TfL and Brent Council. Environmental concerns arise from accusations of e-bikes being dumped in rivers. The company also struggles with legal troubles, facing sanctions in Andalucía and disputes over permits in Brussels and Madrid. Financially, Lime has exited several markets and laid off 14% of its staff, highlighting its vulnerabilities in governance, environmental, and social responsibilities.

Key Controversies:

• Lime faces fines in London
• Lime bikes face expulsion from Brent over unresolved public disruption
• Lime pulls its scooters out of 12 markets and lays off staff
• Lime Bikes Banned in Brussels
• Lime bikes dumped in canals and rivers 'posing pollution risk'
• Lime withdraws bikes from Madrid as city revokes permits
• Paris to bans electric scooters amid road safety concerns
• Lime faces class action over defective scooters and customer injuries

Bird: Governance, Safety, and Market Challenges

Bird has been facing significant ESG risks following its 2024 Chapter 11 bankruptcy due to severe financial issues, resulting in market exits, layoffs, and scooter scrapping. Legal challenges include lawsuits over scooter misuse in Denver and a class action in Austria over unfair liability clauses. Safety concerns in cities like Zaragoza and Málaga have led to revoked operating licenses, while maintenance issues and parking violations in Freeport and Appleton have harmed their reputation. Despite restructuring efforts, Bird’s recovery path is uncertain, exposing it to long-term governance, operational, and environmental risks.

Key Controversies:

• Scooter sharing company Bird files for bankruptcy
• Securities Class Action lawsuit
• Bird exits multiple markets due to financial struggles
• Bird plans to layoff 23% of staff
• Bird on the hook for bad scooter and e-bike behavior in Denver
• Freeport City Council ends Bird scooter agreement over safety and maintenance issues
• Bird Austria faces lawsuit over unfair liability clauses

Voi: Regulatory Struggles and Public Backlash

Voi Technology faces significant ESG risks linked to financial issues and regulatory challenges. In 2024, the company laid off 120 employees to improve profitability. It is disputing the termination of its scooter service in Seville and license revocations in Brussels and Bremen. Ties to sanctioned Russian oligarch Alexei Mordashov have raised scrutiny in cities like Liverpool and Bristol. Additionally, the company is facing consumer complaints about misleading advertising and safety issues, including a scooter fire in Bristol.

Key Controversies:

• Sevilla ends scooter service; Voi disputes decision
• Voi lays off 120 people; around 12% of its workforce
• Voi faces scrutiny over Russian ties and potential license revocations
• Voi loses Brussels appeal, and must remove 3,000 scooters
• Voi leaving London over regulatory challenges and financial struggles
• Voi in court over approval dispute in Bremen

Conclusion

The electric scooter and e-bike rental industry faces significant ESG challenges that place its future sustainability and growth on shaky ground. Companies like Lime, Bird, and Voi must address regulatory compliance, safety concerns, and financial instability to regain public trust. By prioritizing responsible governance, enhancing safety measures, and demonstrating commitment to environmental stewardship, these firms can pave the way for a future where micromobility thrives as a safe and sustainable transportation option.

Reach out to SESAMm

TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.

Globally, ethics and sustainability are important, but the retail industry faces intense scrutiny over supply chain integrity. This spotlight shines on SHEIN and TEMU, two giants in the fast fashion and e-commerce sectors, known for their vast reach yet marred by controversies around labor practices and environmental impacts. This article explores their supply chain strategies, examining how current and emerging legislation, like the CSDDD initiative, aims to tackle the ethical dilemmas plaguing global retail. Through a comparison of SHEIN and TEMU, we assess the effectiveness of regulatory frameworks in addressing these critical issues.
By analyzing their ESG controversies and comparing their responses, we assess how well current and future legislation, particularly the CSDDD initiative, addresses ethical issues in global supply chains.

Specialized Retail: The Case of SHEIN and TEMU

SHEIN and TEMU are compelling use cases due to their past controversies and the focus on their supply chain practices. Both companies have come under scrutiny for their labor practices, environmental impacts, and ethical issues, making them ideal subjects for analysis. By studying their supply chain challenges, we aim to assess the effectiveness of current legislation and predict the potential impact of future regulatory frameworks, particularly in the context of the CSDDD initiative.

While both companies operate with a similar business model, SHEIN is an established player entangled in numerous supply chain controversies. On the other hand, TEMU, a newcomer since 2022, faces similar issues. Comparing them helps us evaluate the effectiveness of existing supply chain legislation and determine whether increased regulatory scrutiny has improved compliance or merely raised awareness of these controversies within the industry.

Note:

Size bias mitigation:

We normalized the data for both companies to ensure an equal basis of comparison, accommodating the difference in operational history—SHEIN since 2008 and TEMU since 2022— to eliminate discrepancies in web attention.

Risk analysis:

It’s worth noting that the figures presented here specifically relate to supply chain risks, as that is the primary focus of our analysis.

Examining Supply Chain Controversies

We analyzed ESG risks in the supply chains of SHEIN and TEMU over the past four years, adjusting data volumes for comparative analysis. SHEIN's supply chain risks have significantly increased since 2021, peaking in 2022 and continuing to rise in 2023, reflecting a growing online focus on its issues. Meanwhile, TEMU, despite only being established in 2022, has quickly come under intense scrutiny. The company faces frequent criticism for its supply chain practices, including condemnations for inaction and ongoing human rights violations.

Examining Social Sub-risks

In our analysis of social risks within the supply chains of TEMU and SHEIN, we discovered that fundamental human rights and labor rights are the most and second most prevalent issues, respectively. Notably, despite TEMU's more recent establishment compared to SHEIN, its supply chain has a relatively higher proportion of human rights controversies.

Both companies have faced serious allegations related to their supply chain practices. TEMU and SHEIN are scrutinized for using Chinese cotton potentially linked to slave labor, with insufficient efforts to mitigate forced labor risks. Allegations include child slavery, privacy issues related to sharing user data, and environmental neglect, including the use of carcinogens in products. Despite their efforts to boost their public image through aggressive marketing and influencer engagements, both companies have been criticized for their approach to environmental responsibility and labor practices.

Political calls for investigations into the use of Uyghur slave labor in both companies underscore their ethical challenges. Neither company has shown rigorous compliance with anti-forced labor laws, lacking stringent programs to audit supplier compliance. This highlights significant gaps in their corporate responsibility efforts.

SHEIN has faced accusations of stealing artists' work and failing to comply with modern slavery reporting regulations, adding to the ethical concerns. Consumers have also been alarmed by hidden clothing tag messages indicating threats. Both companies are heavily investing in lobbying efforts amid regulatory scrutiny as they struggle to balance rapid growth with sustainable and ethical business practices.

Examining Environmental Sub-risks

It's evident that social risks, particularly human rights breaches and labor rights controversies, have received significantly more attention than environmental risks. Despite the severity of environmental events, they represent a lower percentage in comparison. This highlights the prioritization of addressing social issues within these companies' operations.

SHEIN experiences extensive scrutiny, leading to a wealth of data on its practices. Conversely, TEMU, despite facing environmental controversies, has been less transparent about its environmental footprint, with Greenpeace reports highlighting this lack of clarity. This disparity underscores that SHEIN’s environmental impacts are more thoroughly documented than TEMU’s.

For SHEIN, concerns include lead contamination in products, resulting in recalls by Health Canada of toxic children's jackets. Greenpeace's analysis has also revealed hazardous chemical levels surpassing EU regulations. Additionally, SHEIN’s operations are criticized for their contribution to climate change through promoting overconsumption that leads to high carbon dioxide emissions, severe water pollution from textile dyeing, and substantial textile waste.

These environmental and health issues gained attention during SHEIN’s attempts to launch IPOs in the US and UK, spotlighting the company's ethical and environmental practices. Despite SHEIN's pledges to donate towards solving textile waste problems, critics label these actions as greenwashing, calling for significant alterations to its business model to address the underlying issues effectively.

Supply Chain Dynamics: SHEIN vs TEMU

While TEMU doesn't have its own brand like SHEIN, it operates under a comparable business model. It acts as an intermediary, managing shipments for products it doesn't manufacture. Despite their distinct approaches, both companies frequently engage in disputes, drawing attention to their supply chains. Additionally, policymakers often group them with similar firms, subjecting their fast fashion practices to heightened scrutiny.

Recent reports and incidents shed light on TEMU's practices, including its engagement with suppliers previously rejected by SHEIN for substandard practices and allegations of evading responsibility for forced labor. We also detect TEMU's legal battles with SHEIN, involving disputes over supply chain arrangements and copyright violations, and a separate lawsuit filed by TEMU against SHEIN accusing it of coercive tactics against suppliers and allegedly intimidating its third-party suppliers and taking retaliatory actions against them for conducting business with TEMU.

These events highlight the growing scrutiny surrounding the supply chain practices of both SHEIN and TEMU. Senator Rubio's call for an investigation into allegations of Uyghur slave labor usage by both companies, additionally, mentions of Congressional attention has also focused on these companies, with reports exposing violations of U.S. tariff laws and evasion of human rights reviews on imports, shedding light on systemic issues within their operations.

Increasing Sustainability Awareness

We studied the mentions of both ESG initiatives associated with the brands and detected that over the analyzed time frame, SHEIN has been associated with significantly more initiatives than TEMU.

We analyzed the sustainability initiatives of these companies, finding that SHEIN's efforts outpace TEMU's significantly.

SHEIN focused on circular economy practices, exemplified by partnerships like that with Queen of Raw to reuse excess industry inventory and launches such as EvoluSHEIN and SHEIN Exchange, also boosting Product safety mentions, which promote recycled materials and resale of used products, respectively.

In contrast, initiatives related to atmospheric emissions are mainly concerned with reducing supply chain emissions by 25% by 2030, while climate change efforts include innovations with water-saving technologies and collaborations to avoid sourcing from forests and promote low-carbon, recycled textiles.

Social initiatives, though less frequent than environmental efforts, include a $70 million Supplier Community Empowerment Program and compliance monitoring, a community empowerment fund, and clothing drives supporting nonprofits.

Risks versus Initiatives: Focus on SHEIN

Throughout our analysis period, we noted that 2022 was a turning point for SHEIN's sustainability efforts, sparked by several mentions of breaches related to the Modern Slavery Act and child labor allegations in the previous year, which subsequently increased the company’s sustainability-related mentions.
By 2023, as SHEIN prepared for potential IPOs in the US and UK and with the release of a controversial documentary, the company faced heightened scrutiny, with more allegations surfacing in its supply chain concerning various acts and legislations, such as the Modern Slavery Act, Uyghur Forced Labor Prevention Act, and others.
Despite these challenges, mentions of SHEIN’s ESG initiatives also rose, although they remained less prominent than risk-related mentions due to controversies typically gaining more attention online. However, from 2024 to the present, we have observed more initiatives than risks, suggesting that, despite some acts and legislations being non-binding or not directly applicable to SHEIN, the potential reputational impacts drive the company toward positive change.

It's worth noting that we've observed discussions linking SHEIN with the recent EU Corporate Sustainability Due Diligence Directive, also referred to as CSDDD or CS3D. These discussions underscore the view that governments should refrain from incentivizing fast fashion companies like SHEIN.
As the CSDDD is expected to bring about significant changes, forcing businesses to identify, prevent, or mitigate adverse impacts of their operations on human rights and the environment. Notably broader in scope compared to previous legislation, this directive will apply to all EU companies surpassing a certain revenue threshold. Consequently, fast-fashion retailers like SHEIN will face increased requirements to take action and ensure compliance.

The absence of enforceable regulations allows companies like TEMU to continue operating, but SHEIN's actions, particularly as it moves towards an IPO, raise questions about whether its efforts to improve practices are driven by the scrutiny associated with preparing for a public offering or by a sincere commitment to compliance with laws and regulations.

To conclude, our analysis underscores the dynamic landscape of supply chain regulations, ESG risks, and sustainability initiatives within the specialized retail sector, particularly in the fast-fashion industry. A focus on SHEIN and TEMU reveals a rise in both ESG initiatives and identified breaches. SHEIN's proactive initiatives suggest a response to regulatory pressures.
Additionally, our findings suggest that even without binding legal requirements, companies may still choose to comply to enhance their reputation or respond to heightened scrutiny.

Reach out to SESAMm

TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.

Watch the replay of our webinar, "CSDDD Demystified: A Practical Guide for Corporate Sustainability," to gain the actionable insights your business needs to navigate the complexities of the Corporate Sustainability Due Diligence Directive (CSDDD).

In this session, Kevin Ozadanir, Head of Corporate Sales at SESAMm, and Greta Koch, Technical Negotiator for the European People’s Party on the CSDDD, break down the directive's objectives and provide practical guidance for companies tackling compliance challenges. This is your opportunity to:

• Understand the CSDDD's objectives and its role in strengthening the EU's sustainability agenda.
  
• Learn how the directive compares to other regulations, such as the German Supply Chain Act, and what sets it apart.
• Prepare for compliance by exploring strategies to integrate sustainable systems and address diverse regulatory expectations across the EU.
• Get a blueprint for effective risk analysis and supply chain management tailored to companies operating across multiple jurisdictions.
• Stay ahead of political developments, including the potential repeal of Germany's Supply Chain Act and what it means for global sustainability.

The webinar wraps up with a deep dive into integrating CSDDD with other frameworks, such as the EU Taxonomy and CSRD, and provides a clear roadmap for aligning your operations with evolving corporate sustainability standards.

Don't miss this chance to equip your team with the knowledge to tackle regulatory challenges with confidence. Fill out the form to access the webinar replay now!