Fast Fashion on a Fast Decline via Climate Change

Taking a look at H&M’s sustainability efforts to curb climate change

While fashion is sometimes dismissed as a ‘frivolous’ industry, its effect on the environment is enormous. The industry is heavily dependent on natural resources (especially water and cotton) and is a highly polluting business, generating the greenhouse gas emissions that cause climate change. This climate change, in turn, will affect water availability and crop production – posing threats to the industry’s future.

If no actions are taken to reduce greenhouse gas emissions, the demand for water is expected to exceed supply by 40% by 2030 [1]. This could jeopardize cotton, a key input in apparel, as its production is heavily water-intensive. Additionally, the wet processing of clothing (washing and dyeing) also requires heavy water consumption, further demonstrating the substantive risks climate change poses to the fashion industry.

Fast fashion has only amplified all of these effects further, as it has increased the rate at which consumers purchase and dispose of clothes. H&M, a leading fast fashion retailer, offers an example of a company whose operating model is likely to be disrupted by the physical manifestations of climate change and serves as a case study for how the fashion industry can mitigate these threats.

H&M has already experienced the bottom line impact of climate change through extreme weather. The 2010 drought in China resulted in a 150% increase in the price of cotton – this produced a 30% decrease in profits for H&M, as it decided not to pass on the price increase to consumers [2]. Long-term, H&M will face both top and bottom line impacts if the effects of climate change are not curbed, as these effects will both reduce its ability to produce the desired consumer demand for clothing and increase the prices of its raw material inputs.

Recognizing these risks, H&M has already taken steps to increase its sustainability. Focusing on becoming more energy efficient and increasing the usage of renewable energy (in its stores, offices, and warehouses) are the two key ways in which the company is attempting to mitigate climate change. From 2014 to 2015, H&M reduced its total emissions by 56% and increased the percentage of renewables in its total electricity use from 27% to 78% [3]. Both of these metrics were achieved while simultaneously experiencing an 11% increase in net sales, illustrating how revenue and sustainability are not negatively correlated.

The following chart displays the progress H&M has made on both reducing emissions from its own operations and along its value chain [3]:

hm-performance-overview

H&M describes its “conscious actions” to be “climate smart” as the following:

“We will keep supporting innovation in technology enabling more environmentally friendly materials and processes. We will also continue to work for 100% renewable electricity in our own operations wherever there are credible renewable energy certificates which meet our evaluation criteria for quality and impact. We are committed to set science based targets to push our value chain into more sustainable operations.” [3]

As the company attempts to curb the effects of climate change and adopt more sustainable practices, a key challenge it faces is influencing the elements of its supply chain over which it does not have direct control – its third stated “conscious action.” H&M needs to use its bargaining power as one of the largest fast fashion retailers to influence the suppliers that are responsible for the majority of the carbon emissions within the value chain – through raw material production, fabric production, garment manufacturing, packaging, and transportation. Additionally, it should aim to encourage consumers to be more conscious of their clothing consumption and the energy impacts in the way in which they wash and care for their clothes.

The size and strength of H&M within the fashion industry lend it the ability to take on a transformative role and drive the industry to adopt more sustainable practices. By balancing growth with sustainability, H&M can become the industry leader in containing climate change.

 

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[1] “Charting Our Water Future: Economic Frameworks to Inform Decision-Making,” 2030 Water Resources Group (2009), http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/charting-our-water-future, accessed November 2016.

[2] Jacqueline Jackson, “Assessing the Environmental Impact of the Fashion World,” Environmental Leader, October 6, 2014, http://www.environmentalleader.com/2014/10/06/assessing-the-environmental-impact-of-the-fashion-world, accessed November 2016.

[3] H&M Conscious Actions Sustainability Report 2015, http://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/2015%20Sustainability%20report/HM_SustainabilityReport_2015_final_com_4.pdf, accessed November 2016.

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9 thoughts on “Fast Fashion on a Fast Decline via Climate Change

  1. I think it’s great how H&M has been proactive about internally reducing energy and emissions. However, I wonder if that’s enough. Two areas I would love to learn more about is how H&M can help sustainability efforts more broadly and engage the end consumer in becoming more environmentally-conscious. You highlighted how susceptible H&M is to the price fluctuations of raw materials such as cotton increasing by 150%, but is H&M doing anything to work with its suppliers to help minimize future volatility? According to H&M’s Conscious Actions Sustainability Report, 74% of GHGs are produced after H&M sells it to the end consumer. How can H&M influence consumer behavior to help reduce the impact once their products leave the stores (e.g., encourage consumers to use less water when they wash, reuse and recycle clothes)? A key consideration with trying to influence consumer behavior is that it could end up reduce their overall spend at H&M if they reuse / wear clothes longer. How can H&M align their climate smart values with their fundamental business model?

  2. @ARS – thanks for this post! Very interesting read. The solutions in progress you discussed focus on sustainability efforts on the supply end (H&M energy usage & supply chain) – but H&M strikes me as a brand powerful enough to also influence behavior of the demand side. Could H&M implement a program to encourage clothing “recycling”?

    I did a little googling and discovered they actually have a clothing drop-off program in place: https://about.hm.com/en/sustainability/get-involved/recycle-your-clothes.html

    This struck me as very surprising – I love shopping at H&M and have been to stores in NYC, Philadelphia, LA, SF, Boston and even Paris. I have never once seen a bin. Either H&M needs to make the bins wider spread, or perhaps just more prominent (maybe I just missed them).

    Further, it is imperative that the brand pairs processes with education & incentives. As a customer, I would never think to actually take the effort to go back to a store and recycle a used good. One way to educate customers would be to add in a special “green” label in the clothes, reminding people to recycle their goods. An incentive could be to offer a small discount when a customer recycles a garment ($1 off purchase for each good brought in or 10% off whole purchase).

  3. Very interesting post. As you point out, it seems like H&M can continue to take steps as it progresses against its sustainability goals by focusing on its suppliers, especially since they are the biggest contributor of carbon emissions in the supply chain. I would be curious to know if H&M would consider working with these suppliers and manufacturers to use more environmentally-friendly raw materials, such as organic cotton which is less water-intensive or recycled inputs. It seems this could be a major way the company could be part of an overall more efficient supply chain.

  4. Great post @ARS! I’ve heard of Japanese companies (Fast Retailing/Uniqlo) working directly with small businesses in raw material/fabric production but not entirely sure if it goes through the entire value chain. The fact that they have such a huge presence global is probably what gets in the middle of logistics building in terms of packaging and transportation.

    It seems like a big conflict of interest for fast fashion companies to ask consumers to be conscious on their consumption, and I’m curious how they would go about that. Perhaps a method of donation or making clothes out of recycled clothes/materials like we read in Nike?

  5. It is pretty amazing how the drought in China directly translated into a large hit to H&M’s bottom line. It’s great that H&M is focusing on becoming more energy efficient and increasing its use of renewable energy—especially while increasing sales simultaneously. The goal of using 100% renewable electricity is a big commitment for a retailer of that size, and I hope this sets a standard in the industry that others follow. I also wonder if H&M could take its efforts a step further and act as a catalyst within the policy space, perhaps by promoting GHG emission reduction measures in countries where it sources the majority of its materials. Their online supplier map (http://sustainability.hm.com/en/sustainability/downloads-resources/resources/supplier-list.html) shows that it has a geographically diverse set of manufacturing plants, with concentrations in both Europe and Asia. Perhaps H&M could consider shifting more production work to areas with less GHG emissions while also advocating for stricter policies and regulations in countries like China and India.

  6. Great read! You are right that even the most environmentally conscious of us do not tend to consider the impact our own clothing purchases tend to have on carbon emissions. I was surprised to read that the apparel industry is actually the second largest emitter of carbon into the atmosphere (after the oil industry), contributing 10% of global emissions (http://www.forbes.com/sites/jamesconca/2015/12/03/making-climate-change-fashionable-the-garment-industry-takes-on-global-warming/#3cc9c5e7778a).

    You pointed out well that H&M is taking steps to mitigate the risks that climate change brings. I wonder if they could also go further at not just ensuring that their current supply chain is as sustainable as possible, but also actively trying to affect demand in both the type of clothing and the reusability of clothing. People mentioned in the above comments about reusing clothing or mending broken items, but I think they can also market certain fabrics and materials as part of an environmental line. If they can keep prices for these products at relatively the same price as their already affordable clothing, I think it could be a real opportunity for them.

  7. Very interesting post. I think a very big challenge for apparel industry is that the products are not recyclable. Therefore the products when disposed are not recycled and end up increasing pollution level. Similar to Nike’s approach where they use plastic bottles in shoes , H&M can also think of using mix products in the apparels.

  8. Great post! I found this post particularly interesting as I am a loyal H&M customer. I am elated to see H&M shift their sustainability strategy after the 2010 drought in China. More specifically, I admire the approach to set goals that ensure 100% of the transport service providers are Smartway Partners, Wayahead registered or participating in the clean shipping project. In researching ways companies can identify key issues and drivers for supply chain sustainability I found this great guide:

    https://www.bsr.org/reports/BSR_UNGC_SupplyChainReport.pdf

    It will be interesting to see how H&M and other fast fashion retailers continue to optimize their supply chains with an emphasis on sustainability.

  9. What an interesting post ARS! It’s amazing that H&M was able to decrease emissions by 56% and also increase net sales. And while this progress is great for H&M I completely agree that they need to use their power to influence their suppliers and make sure they are also using sustainable practices and lowering emissions within their factories. It would be incredibly shortsighted of H&M to only focus on their own emissions (especially in this day and age when retailers are held accountable for the practices of their suppliers).

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