A Supply Chain Storm Brewing
For H&M, a major fast fashion retailer, a comprehensive approach to environmental sustainability is a core pillar of its business. The rationale for this model is well founded; the apparel industry has complex supply and production chains that contain many environmental touch points, all of which are at risk to be meaningfully impacted by climate change. An overview of an apparel production chain is shown below :
The impact of climate change on the fashion industry is exceedingly relevant to the long-term profitability of apparel companies: Greenhouse gas emissions are expected to double in 50 years and the average surface temperature of the earth is expected to increase , potentially affecting cotton-growing and textile manufacturing. Agriculture uses more than 70% of global freshwater , and growing cotton, a core element of many textiles requires a water-intensive process . In fact, producing one pair of jeans uses ~3,000 liters of water . Water withdrawals around the world, however have tripled over the last 50 years, and it’s expected that the cost of water will increase as it becomes a scarcer resource .
H&M may have already begun to experience the impact of doing business in a world affected by climate change; its average cost of goods sold has steadily increased as gross margins have decreased over the last five years . As resources become scarce and increasingly expensive, it’s critical that apparel retailers like H&M prepare for and mitigate the effects of climate change.
Preparation, Preparation, Preparation
H&M has an extensive environmental sustainability program to lessen this impact, comprised of both short-term projects and long-term target initiatives. Some of the principal program elements are:
The Use of Sustainable Materials: H&M has targeted using 100% sustainable cotton in textile production by 2020 and an increased quantity of recycled polyester, in order to utilize 100% recycled or sustainable materials by 2030 .
Greenhouse Gas Emissions: H&M has targeted becoming climate positive, or reducing more emissions than its supply and production chains generate by 2040 . Additionally, H&M joined the World Wildlife Foundation (WWF) as a partner in its Climate Savers program in April 2017, with the mission to reduce C02 emissions and influence market and policy development surrounding the topic .
Water Usage: H&M entered into a partnership with WWF in 2013 specific to water stewardship, with the following objectives: improve awareness about the use of water, more responsibly use water throughout H&M’s value chain and encourage sustainable water practices with H&M stakeholders. The initial two-year partnership was successful; more than half H&M employees completed water training and 75% of suppliers met the global water quality standard . The partnership has since been extended for an additional five years, during which time H&M plans to integrate water-efficient equipment into all stores and warehouses, ~5,000 locations .
Garment Recycling: In 2013, H&M instituted a global clothing recycling program for used, unwanted or damaged clothing. This initiative has resulted in thousands of tons of garments collected, 99% of which are re-worn, reused or recycled . Further, H&M has partnered with celebrities to raise awareness about garment sustainability and its clothing recycling program. One such YouTube ad featuring M.I.A. has been viewed more than 3.4 million times . An ad for the program can be seen below :
Stormy Skies Ahead?
Although H&M is taking steps to reduce the environmental impact of the millions of garments it produces every year, I’m left wondering if it’s enough. Can sustainable manufacturing and production practices offset the negative environmental impact of increased consumer garment purchase, disposal and waste? I believe that more drastic waste reduction measures are needed, such as a H&M clothing rental / shared clothing program. While apparel rental programs like Rent the Runway exist, they function in a limited market, and there isn’t a fast fashion, mainstream option. H&M has the global influence and infrastructure to engage consumers in a program that could promote real environmental change by reducing the total quantity of garments in the market. By reducing the number of garments produced and sold, H&M could eliminate the corresponding environmental manufacturing and supply chain impacts, together with the finished good waste generated. The company could even consider a subscription-based customer payment model for the program, to establish a profitable business case proposition. I believe H&M could act as an agent for change in the industry and influence customer behaviors  towards a program like clothing rental.
Looking forward, we can expect e-commerce to be an increasingly important channel for H&M. But as consumers shift to shopping online, how will the environment and supply chain be impacted? Can the role of e-commerce tangibly strengthen H&M’s sustainability strategy? And is it possible for H&M to create a sustainability + e-commerce-based business model to eliminate its impact on climate change?
 Magali An Berthon, Infographic: Environmental Impacts of the Textile Industry (Cooper Hewitt Smithsonian Design: Scraps Stories, 2016) https://www.cooperhewitt.org/2016/11/08/infographic-environmental-impacts-of-the-textile-industry/.
 United Nations Environment Programme, GEO-5 for Business (Nairobi: UNEP, 2013), p. 9.
 United Nations Environment Programme, GEO-5 for Business, p. 30.
 Chapagain, A.K., A.Y. Hoekstra, H. H. G. Savenije and R. Gautam, The Water Footprint of Cotton Consumption (Delft, Netherlands: UNESCO-Delft, 2005) http://waterfootprint.org/media/downloads/Chapagain_et_al_2006_cotton.pdf, accessed November 2017.
 WWF Sweden and H&M, Pioneering Water Stewardship for Fashion: Making Water our Business (Sweden: WWF Sweden and H&M, 2015), http://www.wwf.se/source.php/1714891/17-1071%20Partnerskapsrapport%20WWF%20och%20HM_170629.pdf, p. 6.
 United Nations Environment Programme, GEO-5 for Business, p. 11.
 Source: [H&M AB Financials, Income Statement], Capital IQ, Inc., a division of Standard & Poor’s, accessed November 2017.
 H&M, The H&M Group Sustainability Report 2016 (Sweden: H&M, 2016), http://sustainability.hm.com/content/dam/hm/about/documents/en/CSR/Report%202016/HM_group_SustainabilityReport_2016_FullReport_en.pdf, p. 123.
 WWF and H&M, Pioneering Water Stewardship and Climate Action for Fashion: About the Partnership (Sweden: WWF Sweden and H&M, 2017), http://d2ouvy59p0dg6k.cloudfront.net/downloads/facts_about_the_partnership_fas_2_1.pdf, p. 2.
 WWF, Discover the Benefits of Leadership with WWF Climate Savers (Washington D.C.: WWF, 2012), https://c402277.ssl.cf1.rackcdn.com/publications/461/files/original/A5_brochure_Climate_Savers_120701.pdf?1348776926, p. 3.
 WWF Sweden and H&M, Pioneering Water Stewardship for Fashion: Making Water our Business, p. 8.
 WWF Sweden and H&M, Pioneering Water Stewardship for Fashion: Making Water our Business, p. 14.
 H&M, “World Recycle Week – What Happens Next?” YouTube, published April 11, 2016, https://www.youtube.com/watch?v=N3QYJuu2vy0, accessed November 2017.
 H&M, “H&M World Recycle Week Featuring M.I.A.,” YouTube, published April 11, 2016, https://www.youtube.com/watch?v=f7MskKkn2Jg, accessed November 2017.
 H&M, “H&M Bring It On,” YouTube, published January 24, 2017, https://www.youtube.com/watch?v=7i4JSzB8VlU, accessed November 2017.
 Gérard, P., & Cachon, R. S. (2011), The value of fast fashion: Quick Response, Enhanced Design, and Strategic Consumer Behavior. Management Science, 57 (4), p. 778-795.