Why is climate change relevant to retail?
The retail sector contributes to climate change through its carbon emissions across the retail value chain. The retail industry emits about five percent of global greenhouse gas emissions [b]. This is approximately the emissions of the aviation industry, or the country of Russia [b].
Today, retailers must decide how to operate in a world where climate change impacts raw materials and pricing, consumer trends and purchasing patterns, and the economies and countries a retailer operates in. Customers are increasingly looking to shop brands that have a positive impact on the environment [c]. The retail value chain is based in areas with water shortages and in countries with a high share of fossil energy usage [d]. Climate change has been slowing the pace of crop growth, and the industry faces increasing prices [c]. For example, the price for a pound of cotton increased from $60 in early 2015 to more than $70 in late 2016 [c].
Why should H&M care?
H&M is the second largest fashion retailer in the world today. With over 4,500 stores in 68 global markets, H&M’s footprint and brand has substantial influence in the global retail economy [e]. In this position the company has an opportunity to influence several players in the retail value supply chain including suppliers, customers and other players in the industry [d]. H&M has identified an opportunity to improve its climate impact across all steps of its retail value chain [a]. Outside of directly owned stores, warehouses and office buildings, the value chain includes raw materials agriculture, polyester manufacturing, garment composition, and even disposal and recycling of H&M products at the end of their life cycle [a].
Climate Positive by 2040
In 2017, H&M announced a long term goal to be climate positive by 2040 throughout the company’s supply chain. This means that the company looks to reduce more greenhouse gas emissions than it will emit through the value chain [f]. In the short term, the company has set a 2020 reduction target for its operational emissions [f].
In order to move towards a climate positive value chain, the company plans to focus on three key areas:
- “Reduce energy need across the value chain”
- “Ensure energy comes from renewable and sustainable resources”
- “Take actions to reduce greenhouse gases from the atmosphere beyond the footprint caused by our value chain” [a]
Internally, this focus on climate positive is supported by a global sustainability group of 220 employees. [g]
To date, H&M has achieved 96% use of renewable energy from a baseline of 78% in 2015 [a]. Among its current activities, the company is looking into natural carbon sinks and programs to protect valuable natural biomass and promote sustainable agriculture, as well as investment in tech innovations to absorb greenhouse gases [a]. H&M looks to serve as a model and industry standard for climate change. The company was the first textile company to partner with the World Wildlife Foundation in its Climate Savers Program. WWF is working with H&M to reduce greenhouse emissions through dialogue around strategy and engagement with suppliers, customers and policymakers [d]. Most recently, H&M kicked off Climate Week in New York City with a recycling initiative and announced its Climate Positive initiative. [i]
H&M is a clear leader in climate change within the fast retailer industry. Today, the organization is focused on how it can be a sustainable member of the global retail community. Over the next few years, H&M should ensure it is on track to deliver its customer promise of “offering fashion and quality at the best price” within the context of a world facing climate change. With rising crop prices and changes in regional climate trends, H&M faces risks to its bottom line. In 2015 and 2016, unanticipated weather trends hit retailer sales [i]. Moving forward, it is crucial that the company invests in optimizing its inventory processing and fulfillment to be able to adjust to changing weather patterns. H&M should look to decrease processing times and increase flexibility in its ordering processes.
As I look ahead there are several questions that remain for H&M:
- Can H&M sustain its low cost customer offering vs. competitors like Zara while maintaining its large climate positive and sustainability initiatives?
- How can H&M directly influence other retailers to make strides in climate positive initiatives?
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[a] Video, Climate Positive Value Chain by 2040, H&M Website, accessed November 2017. [https://about.hm.com/en/sustainability/sustainable-fashion/climate-emissions.html]
[b] Alden Nate. Panel Discussion on Climate Change, cited in “Fashion Industry Greenhouse Gas Climate Change Sustainability”, published by Fashionista.com, September 22, 2017.
[c] Zaczkiewicz, Artur. “Is Climate Change Killing the Seasonality Of Fashion Apparel Retailing?”, published by the World Wildlife Fund, October 18, 2016.
[d] World Wildlife Fund Website, April 4, 2017.
[e] H&M Website, Market Overview, October 2017
[f] “Global Retailer H&M joins WWF’s Business Leadership Programme Climate Savers”, World Wildlife Fund Website, April 4, 2017.[http://wwf.panda.org/?296990/HM-joins-Climate-Savers-WWF]
[g] H&M Group Sustainability Report 2016, H&M Website, accessed November 2017.
[h] Kostyal, Adam. “H&M shows that climate positive fashion is always in style during climate week”, Nasdaq Business, September 22, 2017.
[i] Long, Heather. “Everyone loves warm December…except stores”, CNN Money, December 26, 2015.[http://money.cnn.com/2015/12/16/investing/warm-december-bad-for-retail/index.html]