Climate Change and H&M: Is Sustainability the Answer?

H&M has committed to operate a more environmentally sustainable fast fashion business, but as climate change looms over the complex supply chain of apparel production, are these efforts enough?

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 [1]:

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 [2], potentially affecting cotton-growing and textile manufacturing. Agriculture uses more than 70% of global freshwater [3], and growing cotton, a core element of many textiles requires a water-intensive process [4]. In fact, producing one pair of jeans uses ~3,000 liters of water [5]. 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 [6].

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 [7]. 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 [8].

Greenhouse Gas Emissions: H&M has targeted becoming climate positive, or reducing more emissions than its supply and production chains generate by 2040 [9]. 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 [10].

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 [11]. 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 [12].

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 [13]. 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 [14]. An ad for the program can be seen below [15]:

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 [16] 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?

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Sources:

[1] 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/.

[2] United Nations Environment Programme, GEO-5 for Business (Nairobi: UNEP, 2013), p. 9.

[3] United Nations Environment Programme, GEO-5 for Business, p. 30.

[4] 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.

[5] 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.

[6] United Nations Environment Programme, GEO-5 for Business, p. 11.

[7] Source: [H&M AB Financials, Income Statement], Capital IQ, Inc., a division of Standard & Poor’s, accessed November 2017.

[8] 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.

[9] 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.

[10] 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.

[11] WWF Sweden and H&M, Pioneering Water Stewardship for Fashion: Making Water our Business, p. 8.

[12] WWF Sweden and H&M, Pioneering Water Stewardship for Fashion: Making Water our Business, p. 14.

[13] H&M, “World Recycle Week – What Happens Next?” YouTube, published April 11, 2016, https://www.youtube.com/watch?v=N3QYJuu2vy0, accessed November 2017.

[14] 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.

[15] H&M, “H&M Bring It On,” YouTube, published January 24, 2017, https://www.youtube.com/watch?v=7i4JSzB8VlU, accessed November 2017.

[16] 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.

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7 thoughts on “Climate Change and H&M: Is Sustainability the Answer?

  1. I’m very glad that you chose this topic, Andrea, because we’re observing the huge environmental impact of the fast fashion industry as it scales. While your post was extremely informative, it begs a lot of interesting questions.

    Intuitively, it seems that as people begin to view clothes as ‘disposable’ as opposed to long-lasting products, this will inevitably lead to more waste. While H&M’s Garment Recycling program attempts to combat some of this waste, it seems unlikely that a large portion of their customers would take part in this for a number of reasons including difficulty traveling to return the items (especially in developing countries or rural areas), perception of the clothes as disposable, and lack of awareness of the program. Given the fundamental ‘use it and lose it’ concept behind the ‘fast fashion’ industry, it possible to make fast-fashion as sustainable as non-fast fashion clothing companies?

    More over, after reading the IKEA case today I can’t help but wonder about whether it is possible that when using these sustainable materials, H&M can also reduce their weight, thereby significantly reducing transportation waste. However, I have to wonder whether as H&M becomes that much more responsive to customer demand and is able to quickly stock stores, if this will inevitably lead to lower volumes being transported, shipping trucks that not filled to 100% capacity, and increased environmental waste. The issue of how H&M can quickly respond to customer demand while simultaneously be very efficient in their transportation is an interesting one.

  2. I want to build on Shalei’s point above regarding the recycling of these clothes. I often wonder how companies repurpose the clothing that consumers drop into bins to “recycle.” I imagine it is expensive/technologically more intensive to transform a used product into an item that was as valuable as the original product. I suspect that companies instead engage in “downcycling,” where they produce goods that are of less value than the original product (ie, take a used shirt and make cotton socks out of it instead of another shirt). Although this does decrease the need to source brand new material, it still creates substantial waste. I wonder how transparent companies should be in how they repurpose used goods into new products, and whether that will affect consumer perception of their offerings and their overall sales growth.

  3. I agree that H&M has the potential to act as an agent for change in the industry and influence customer behavior. However, I don’t think that offering a program like clothing rental would be viable, given the H&M customer promise and operations model. As a fast-fashion, omni-channel retailer, H&M’s customer promise is “more fashion choices that are good for people, the planet and your wallet.” [1] I believe the issue is that there is a trade-off between fast-fashion and clothing quality. Unlike retailers like GAP, H&M clothing comes to market relatively quickly and product variety changes numerous times throughout each season. However, changing fashion trends often come at the expense of clothing durability. Renting and re-using clothing requires quality clothing, and H&M management would need to improve its clothing quality in order to launch such a program. Thus, I think that investing in more recycling initiatives would be a more sustainable option for H&M in the long-term.

    In terms of how the environment will be impacted as consumers shift to online, I think that management will focus on adapting the supply chain such that consumers can more conveniently ship and return clothing purchases. I think that increasing overall convenience for consumers will involve higher transportation costs and put pressure on the environment. Management will need to focus on fulfilling customer orders as efficiently and at the lowest cost possible by optimizing its distribution and fulfillment strategy.

    That said, I don’t think that H&M will ever be able to “eliminate” its effect on climate change, but I think that the integration of technology into its supply chain and investing in its online capabilities will shift the focus from brick and mortar to e-Commerce, and this will ultimately limit the negative impact of the company’s global retail footprint.

    [1] H&M. “H&M Is Committed to Sustainability.” H&M Conscious, career.hm.com/content/hmcareer/en_us/workingathm/get-to-know-us/hm-conscious.html.

  4. I absolutely love the solution you proposed of having H&M start its own clothing rental/ shared clothing program! I wanted to highlight some additional statistics and facts in support of the sustainability impacts of such a solution. According to a PBS article (https://www.pbs.org/newshour/nation/how-to-stop-13-million-tons-of-clothing-from-getting-trashed-every-year), people in the U.S throw away 13 million tons of textiles , which translates into  about 85% of their clothes each year. This accounts for 9 percent of total non-recycled waste. In the same article, the Environmental Protection Agency estimates that, in terms of carbon emissions, the amount of worn clothing already recycled each year into new apparel is equivalent to taking one million cars off the road! You can bet that a lot, if not the majority, of the clothing that ends up in the landfills are from the cheaper, fast fashion brands like H&M. Furthermore, start-up companies like Le Tote, which I’m an avid fan of, have already began efforts to make everyday casual clothing available for rent. Le Tote sells subscriptions to unlimited totes of 5 casual articles of clothing and accessories at a time. The good reception of such services have already created a market that should make an entry by H&M or another fast fashion retail brand into the space very welcoming!

  5. I totally agree with your solution of attempting to educate consumers and convince them to participate in H&M’s combating of climate change. Given the nature of H&M’s business as a fast fashion business, however, it is difficult to reconcile their goal to sell more product and their environmental impact on each new product sold. I wonder if they could take their stance a step further and follow Patagonia’s lead by targeting the explicitly consumer-oriented traditions, like Black Friday, to establish their opposition to excessive consumerism [1]. By taking a stand during times where their competitors are fiercely chasing consumer attention, H&M may be able to further differentiate and draw attention to the brand and the initiatives they are running to be better environmental citizens.

    [1] Patagonia, “Don’t Buy This Jacket, Black Friday and the New York Times,” https://www.patagonia.com/blog/2011/11/dont-buy-this-jacket-black-friday-and-the-new-york-times/, accessed November 2017.

  6. I agree that if H&M wants to improve their environmental consciousness that they need to consider how their business model needs to be changed. I see serious tension between ‘fast fashion’ and ‘environmentally friendly’, and question whether a company can realistically be both. H&M’s fast fashion business model profitability relies on selling high volume in exchange for low prices. With shrinking margins, H&M must consider ways to reduce costs, and I wonder if the quality of their goods will reduce as they seek ways to strip out as much cost from each item as possible. If the quality of goods decreases, the lower the lifetime of each unit will be for the purchasing consumer, and the less likely it will become that the good can be reused by others. Without longer-lasting goods, the more the consumer will need to return to the store to by more.

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