First grader not participating in class

My daughter is 7, she's in first grade. I keep getting emails from her teacher saying that my daughter refuses to participate in some class activities and sits out at times in unified arts.

I talk to her about this daily and offer coping skills but nothing is working. We've done reward charts, taken away privileges and communicated about these issues daily.

She's very smart and is capable of doing the work. However she's is so self conscious and is worried that people are always looking at her. I don't get it. I've signed her up for sports and gymnastics class, it's like pulling teeth to get her to participate. "She's scared"

I feel like I'm failing as a parent! What can I do?!