The macroeconomic environment is moving quickly—inflationary pressures, war in Europe, political instability, and plenty of other topics to make a trader's head spin. While there’s an abundance of structured macro data, it's much more difficult to extract value from unstructured text on the web.

However, with the right partner and the right tools, it doesn't need to be difficult to rein in this complexity. But more on that later.

More data, more problems

We're obviously in the information age; we have more data within reach than ever before. And you'd think that more data would make it easier to find consistent relationships between the macro economy and price returns. The hard truth is that it doesn't.

Of course, you have access to comprehensive historical information, but developing economically intuitive and worthwhile systematic strategies from historical data alone is challenging. Despite having this data, it could still be incomplete, missing that bit of nuance for a theme you're examining.

Nowcasting for more complete, current data

Nowcasting—a contraction of the words now and forecasting—is the prediction of the present and the near future using data from the recent past as an economic indicator. Nowcasting models can be applied in real time as a proxy for official measures, such as monitoring the state of the economy, themes, or sectors: food, transportation, energy, and so on.

For example, you could look into what's being said about supply chain disruption for semiconductors. How is the topic trending across industries or the broader public? And how positively or negatively is that topic perceived over time? This information helps give financial data context and direction, a way to predict what happens next.
So where do you turn to for reliable, timely nowcasting data?

Nowcast-enhancing platform

At SESAMm, we have a flexible, adaptable, and modular platform to nowcast pretty much any macroeconomic theme: inflation, supply chains, unemployment, and everything in between. If you can gauge it, we can find data on it.

How do we do this? Our natural language processing (NLP) platform makes sense of all available news, articles, and forums on the web. Currently, there are more than 20 billion articles in our data lake, and it's growing by millions daily. And because we update our data lake multiple times a day, you can read nowcast macroeconomic indicators in near real time.

This flexible approach to building themes goes way beyond off-the-shelf sentiment feeds, and you can adapt to new, emerging factors on the fly.

Use case: inflation insights

With the TextReveal® API and Dashboards, you can generate custom proprietary inflation requests—or pull existing queries by country and sector—and use this data in your nowcasting models (Figure 1).

In this example extracted from our API (Figure 2), the number of sources mentioning inflation is relatively stable until 2021, when it starts to increase rapidly, in anticipation of actual inflation readings.

As you can see, you can track a topic and map it to various segments, creating a signal that accurately follows that theme over time. But that's not all. Macro teams can inject their expertise into building these queries, too. So if they have specific ideas on keywords and themes to capture—for example, inflation in Brazil—they have complete control over them.

Ultimately, you can break down the data by volume, sentiment, sector, language, or country. Do you want to know what the Japanese market makes of rising inflation in the U.S.? With SESAMm's platform, you can slice the data in different ways to find out.

Results with transparency

All that inform the results of your queries are available for scrutiny. Say you want to understand why a topic or theme is trending one way or the other, or maybe the sentiment isn't what you expect. You can drill down to the source articles to see why (figure 3).

Use Case: predictive signals for macro factors and commodities

We worked with a client as part of an asset allocation strategy to build indicators reflecting the tone of the Fed fund rate to see what we could predict based on the indicators.

[figure 4]

In Figure 4, the language we uncover becomes increasingly dovish, as indicated by the blue line, the aggregate of the hawkish and dovish indicators. It's proceeded by the fall in interest rates, the start of covid, and the recent inflationary period. Then, the indicators spike way before interest rates move up. Of course, it isn't the only factor, and it's not 100% predictive, but it does reflect future movements. Inflation is at an eight-year high right now, so it's indicative of continuing inflation returns and continuing rising interest rates.

Nowcasting and forecasting with TextReveal

With TextReveal, you can nowcast any macro theme by building expert-driven queries and predictive forecasting signals to get insights into volume, sentiment, and more.

If you want to find data relationships that accurately reflect economic trends and macro themes to what's happening online in near real time with a high degree of control, reach out for a demo.

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.

A few months ago, Sylvain Forté, CEO of SESAMm, and Julia Haake, Head of ESG Ratings Agency at Ethifinance, sat down and dove deeper into how AI and new regulatory standards are reshaping the future of ESG ratings for rating providers.
Download the ebook and have an insider’s view into their thoughts on ESG regulations for rating agencies, the challenges they face, and the possible solutions.

What You'll Learn:

• Upcoming ESG Regulations for Rating Providers
• ESG Data Availability and Key Challenges
• AI Applications in ESG Ratings
• CSRD and ISSB: Impacts on Data Standardization

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