Sustainability at H&M: Cleaning Up Its Act

H&M attempts to reduce its dependence on unsustainable raw materials and clean up its act.

H&M is the second largest fashion retailer in the world with revenues of $21.7B.  It operates in 61 countries, has 3,700+ stores and employs ~132,000 people.

Climate change poses a significant threat to H&M as well as the broader the textile manufacturing industry. Textiles such as cotton are one of the biggest cost components for H&M. Global warming is expected to reduce in crop yields, due to changing temperatures, flooding and drought conditions.[1] Given this, H&M may find it hard to source quality raw materials at a competitive price and with consistent supply. Raw material suppliers that are in water-stressed areas may also see a lot more regulatory requirements for water usage and waste discharge – leading to higher raw material costs.

Additionally, H&M and its suppliers have manufacturing and processing facilities located in ~33 countries around the world [2]. Many these of are in areas susceptible to the adverse impacts of climate change, such as rising sea levels, floods, and other extreme weather conditions. Unforeseen weather conditions could result in a temporary shutdown of these facilities, leading to production losses. Like what Nike faced in 2008 when flooding in Thailand caused four of its factories to shut down. [3]

Adverse weather conditions can also have an impact on H&M’s logistics and supply chain, leading to temporary or permanent damage to their supply chain infrastructure and assets, causing a disruption in operations and sales.

Climate change and global warming will also result in changing and variable consumer preferences. Since H&M and other retailers plan their manufacturing cycles based on seasonal collections, drastic weather fluctuations could throw off production cycles, change how long collections stay on the shelf and determine what distinct changes need to be made across collections.

In light of this, H&M has undertaken several initiatives to reduce the impact of climate change on its business as well as to reduce its emissions footprint.

Cotton is the raw material H&M uses the most, but is it also the most susceptible to the impacts of climate change as it requires a lot of water to grow. Hence H&M has begun sourcing cotton from more sustainable sources, and their aim is for all cotton to
come from sustainable sources by 2020. [4]

They have also increased their reliance on the use of more sustainable materials, such as [4]

  • Recycled Polyester: made from oil-based waste such as PET bottles
  • Recycled Polyamide: recycled from materials like old fishing nets and carpets.
  • Lyocell: made from the fiber of certain trees that grow quickly, require little water and few pesticides, making it more sustainable than cotton
  • Recycled Wool: waste or cut-offs created during production, or from clothes gathered via their garment collecting initiative.
  • Organic Hemp: requires less water than cotton and grows well even in cold climates.

H&M is also committed to reducing its emissions footprint across the value chain to help curb climate change. To this end, their mission is to use only renewable energy in the operation of all their stores, offices, and warehouses. In 2015, 78% of all the electricity used by them came from renewable sources. They are also committed to increasing their energy efficiency in their stores with a target of reducing electricity use by 20% per store sqm by 2020, compared with 2007. [5]

H&M’s hybrid approach to design and production cycles will also allow it to be more sensitive to changing consumer needs. It is vertically integrated with its own distribution network and offers two primary collections every year (Spring and Fall) with longer lead times [6]. However, within each season, there are sub-collections with shorter inventory that enables H&M to be more sensitive to changes in consumer demand.

Going forward, H&M could also bolster partners in their value chain to be more environmentally responsible and adopt best practices with regards to water management, energy consumption, and waste disposal.

Word Count [640]

References

[1] Adapting to Climate Change: A Guide for the Consumer Products Industry: https://www.bsr.org/reports/BSR_Climate_Adaptation_Issue_Brief_CP.pdf

[2] http://sustainability.hm.com/en/sustainability/downloads-resources/resources/supplier-list.html

[3] http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html?_r=0

[4] http://about.hm.com/en/sustainability/sustainable-fashion/materials.html

[5] http://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/2015%20Sustainability%20report/HM_SustainabilityReport_2015_final_com_4.pdf

[6] http://www.forbes.com/sites/gregpetro/2012/11/05/the-future-of-fashion-retailing-the-hm-approach-part-3-of-3/#6e0358606dbf

[7]http://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/2015%20Sustainability%20report/HM_SustainabilityReport_2015_final_com_4.pdf

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6 thoughts on “Sustainability at H&M: Cleaning Up Its Act

  1. I think it’s exciting to look at a category such as apparel – which is all pervasive. I like the approach to shift to sustainably grown cotton, I think that cotton still poses a challenge (albeit less) to the environment. So, while it is a good short term initiative, I am not sure if its a great long term strategy. On the other hand, I particularly liked the idea to switch from cotton to other materials which, IMO, is the most sustainable long term strategy. It’d be interesting to explore what percentage of current output/WIP output is still cotton. And what’s the plan for shifting from cotton in the long term.

  2. Interesting post — and somewhat surprising to see what H&M is investing so much into sustainability given their poor track record with overseas sweat shops. I would be curious to understand how H&M’s sustainability initiatives and responses to climate change are impacting the local communities in which H&M factories operate.

  3. Great job detailing how H&M has adapted to the challenges posed by climate change. I do wonder, however, to what extent does H&M truly care about increasing sustainability given that their core business – the business of fast fashion – relies on constant if not increasing consumption of fashion, the production of which contributes to global warming.

  4. It is great to see all of the ways that H&M is working to pursue sustainability amid the challenges presented by climate change. Apart from promoting apparel made from recycled materials, I think it would be good of them to promote apparel which lasts longer. Much of the materials used by H&M lead to them having a very short useful life. While I understand that the fashion industry typically drives to turnover clothes each season, in an effort to be truly sustainable, H&M could also consider investing in changing this perception and providing clothing that lasts longer than normal.

  5. You have addressed the fact that H&M may have to adjust its actual design process and inventory turnover around the fact that winters will become truncated and the spring and summer seasons will blend and become elongated. As a “fast-fashion” retailer, H&M relies heavily on the variety of seasons to spur inspiration for its designs. Over the next few decades, will H&M be able to continue rotating its stock as its current pace without the concurrent change in seasons?

  6. Fascinating read – thanks Shiv for researching and blogging this! Building on Ldubs’s comment that “somewhat surprising to see what H&M is investing so much into sustainability given their poor track record with overseas sweat shops,” I am curious to know whether H&M is positioning the sustainability initiative as a truly global effort, or more as a zero-sum PR-driven move to uplift their public images in core markets while shifting most of their climate tolls to workplaces/suppliers with adverse working and environmental conditions overseas.

    Thanks again for your time and insights, Shiv.

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