Will Climate Change Affect H&M?
H&M, a ‘fast fashion’ brand that manufactures clothing quickly and inexpensively, relies on a readily available supply of cotton at cheap prices. Managing cotton resources is critical to H&M’s supply chain – cotton is the most commonly used fiber in H&M’s clothing [i].
However, as global temperatures rise due to climate change, droughts will become more prevalent and the supply of cotton will be threatened [ii]. Growing cotton requires a significant amount of water – representing 10% of all water used for agriculture – and water shortages will therefore significantly reduce cotton yields [iii]. Global cotton shortages will result in greater competition among companies to secure raw materials, increasing the price of cotton and ultimately hurting H&M’s future profitability. H&M must focus on strategies to sustain and improve the supply of cotton in the long-term.
Furthermore, H&M is one of the largest consumers of cotton globally [i]. Fashion brands consume substantial quantities of cotton, and as a ‘fast fashion’ brand, H&M cycles through trends frequently and consumes textiles in significantly higher quantities than its luxury counterparts. Given its size and scale, H&M has a responsibility to drive change across the industry and influence other companies to follow suit [iv].
H&M’s Short-Term Strategy
H&M publicly committed to sourcing 100% of its cotton from sustainable resources, including organic and recycled cotton, by 2020 [iv]. Organic cotton is grown without pesticides, thereby sustaining the health of the soil and surrounding water sources, and is majority rain-fed, reducing pressure on local water sources. Overall, compared to non-organic cotton, organic cotton production could reduce water consumption by 90% and energy use by 60% [v].
H&M partnered with farmers and non-profit organizations to source sustainable cotton, increasing its use over three-fold from 13% of overall cotton consumption in 2012 to 43% in 2016 (Figure 1) [iv]. H&M remains dedicated to bridging the gap to reach its 2020 goal of 100% sustainable cotton use: H&M employs 220 people globally who focus on sustainability, the Head of Sustainability reports directly to the CEO and together they review progress biannually, and finally, H&M publishes an annual sustainability report, which is made available to the public [iv].
Figure 1: Sustainable Cotton as a % of H&M’s Total Cotton Consumption [iv]
H&M’s Medium-Term Strategy
In 2016, H&M commissioned a study to understand the impact of using recycled cotton to produce its clothing [iv]. The results revealed that by using recycled cotton instead of virgin cotton, water usage could be reduced by 80-90% for the stages up to when the fiber is ready for spinning. However, due to quality issues, H&M is unable to incorporate more than 20% of recycled cotton in its clothing. Going forward, H&M is investing in technology to overcome this challenge.
- A 2017 study that evaluated the sustainable cotton practices of 75 global companies found that H&M had a low score with respect to traceability of its cotton supply chain [i]. H&M fails to publish an extensive list of its suppliers and its total volume of cotton consumed. H&M should be transparent with its supply chain so that other companies can easily reference its network, thereby increasing uptake of sustainable cotton across the fashion industry. However, if H&M has negotiated competitive prices with its suppliers, revealing its sources could cause H&M to lose its competitive advantage against peers with respect to raw material costs.
- H&M should publish the volume of cotton that it consumes so that it can be easily compared to peers and held accountable for driving up demand. This would incentivize H&M to incorporate more recycled cotton in its clothing going forward.
- H&M’s ‘fast fashion’ business model will exhaust cotton supplies in the future. ‘Fast fashion’ brands encourage a ‘throwaway mindset’ by encouraging consumers to buy more clothes by making them cheap and cycling through trends frequently. However, the fabric could last for decades. Over the medium-term, H&M management should consider decelerating their fashion trend cycles to reduce overconsumption and waste. As a leader in the ‘fast fashion’ space, H&M could set precedents for other companies to follow, potentially revolutionizing the industry.
- Should H&M be praised for its sustainability efforts despite its high clothing turnover contributing to waste?
- Can H&M successfully change its business model to reduce overconsumption of cotton?
[i] Sustainable Cotton Ranking. “H&M: Create internal alignment and know your supply chain.” http://www.sustainablecottonranking.org/interview/h-and-m, accessed November 2017.
[ii] Center for Climate and Energy Solutions. “Drought and Climate Change.” https://www.c2es.org/content/drought-and-climate-change/, accessed November 2017.
[iii] Stanford Value Chain Innovation Initiative. “Socially and Environmentally Responsible Supply Chains: A Focus on Trends in Organic, Traditional, and Sustainable Cotton.” https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/other-trends-organic-traditional-sustainable-cotton.pdf, accessed November 2017.
[iv] H&M, 2016 Sustainability Report. Stockholm: H&M, 2017.
[v] Textile Exchange. “Life Cycle Assessment (LCA) of Organic Cotton.” PE International, 2014.
Cover Image: Self constructed.