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Case Study: H&M on Sustainability

The case study features H&M on sustainability. As we all know, sustainability is now a must in every organization. And companies are putting in more effort. They are integrating these initiatives into their values and culture. Many companies are focus on sustainability, such as Netflix. Another company, that is changing the narrative is H&M. Indeed, H&M is one of the leading brands in the fast-fashion industry. Despite, the industry’s prevalent abused and exploitation, H&M is changing the conversation and is leading the way for sustainability.

H&M: Humble Beginnings

It all started with Swedish entrepreneur Erling Persson who founded H&M in 1947. The first store was open in Västerås, Sweden, and was called “Hennes,” which is Swedish for “Hers.” In 1968, Persson acquired another retailer company by Mauritz Widforss, and the name was changed to Hennes & Mauritz. Indeed, the stores’ success led the company to offer more clothing lines – men’s, children’s, and teens. In addition, by 1974, the company is listed on the Stockholm Stock Exchange and was rebranded with the abbreviation H&M. Currently (before COVID), H&M operates over 5,000 stores worldwide and employs 120,000 people.

H&M: Take on Sustainability

An ethical company is dependent on strong ethical leadership. They correspond to each other. Indeed, looking at H&M Group, the leadership of  Erling Persson has been passed on to his son and grandson, Karl-Johan Persson. And he retains that strong foothold of his grandfather’s ethical values. No doubt, the company is transparent within the company’s culture. Surely, the leaders are the main driver in building an ethical culture within the organization. The Persson Family treats H&M as a family business despite being a multi-billion-dollar brand. Clearly, strong ethical leadership is manifested in the company’s corporate governance framework.

H&M: Take on Corporate Governance

Corporate governance will not be as effective if we only consider the legal aspect. It must also incorporate the ethical compliance mechanism. Let’s shift our focus first to The Swedish Code of Corporate Governance. The code revolves around the principle of “comply or explain”. This means the company can deviate from the framework provided they can explain why it is so. And H&M is in compliance with this framework. This is quite evident if you look at their Corporate Governance Report which heavily focuses on sustainability. This means managing the company in a sustainable manner that is responsible and efficient. Above all, it must be aligned with the shareholders’ interests. The report revolves around having a strong ethical compass across the company and its supply chain worldwide.

Sustainability Initiatives: Becoming Full Circular

The circular economy is an emerging business model concept. Mainly because the current linear economy business model is not sustainable. Thus, H&M’s initiative on becoming fully circular is to fully optimize resources and minimize waste. And in order to become fully circular, H&M has integrated the concept. It is integrated from design, sourcing of materials, manufacturing, packaging, consumer use, and re-use/recycling of apparel.

According to H&M Sustainability Report (2019), the following are the company’s initiatives in achieving the circular business model:

1. Sustainable Materials

Sourcing Cotton. In 2019, H&M invested in Infinited Fiber Company and a follow-on investment in Re:newcell. Indeed, the two companies made a revolutionary technology that produces new fiber material (cotton) from textile waste closing the loop. It is revolutionary because textile waste can be recycled endlessly without compromising the quality of the new material. In addition, H&M joined the Better Cotton Initiative (BCI) in 2010 to ensure cotton is sourced more sustainably. As of 2019, H&M is sourcing sustainable cotton at the 97% mark, and the target is to reach 100% by 2020.

Sourcing Wool. The production of wool is often associated with unsustainable and ethical practices. The H&M Group joined the Responsible Cashmere Round Table to reduce the social and environmental impact of cashmere production in Mongolia.

Leather. The H&M Group is part of the Responsible Leather Round Table and Leather Working Group focused on sourcing animal-derived leather that addresses social, environmental, and animal welfare impacts.

Chemicals. The H&M Group is a signatory of the Zero Discharge of Hazardous Chemicals (ZDHC) and is committed to achieving zero-emission hazardous chemicals from the textile supply chain by 2020.

2. Packaging

The H&M Group collaborated with Ellen MacArthur Foundation for its packaging reduction, circular design, and material choice. In addition, H&M has partnered with international design firm IDEO to create a sustainable and cost-conscious e-commerce packaging system.  Thus, they aim to eliminate plastic shopping bags and replaced them with 100% Forest Stewardship Council (FSC) certified paper bags.

3. Reuse/Recycle

Product use and repair. The Clevercare label educates consumers on how to take care of their clothes like lower wash temperatures and hang drying instead of tumble drying. Stores in Sweden offer sewing repair services to customers.

Hello Sellpy. Pre-loved clothes H&M bought a majority stake in Sellpy, a Swedish e-commerce company that sells pre-loved clothes. H&M conducted a trial test which was a success last year and will be expanded to more stores in 2020.

Garment collection initiatives. H&M partnered with I:CO, a garment collection company that is scalable, ensuring efficiency in acquiring waste textiles. The investment is in place of Infinited Fiber Company and Re:newcell, converting old garments into new fabric, recycling the materials.

Why buy if clothes can be rented. H&M launched a rental service in Stockholm stores where consumers can rent from the Conscious Exclusive Collection.

Sustainability: Expectation vs Reality

Clean Up Australia is a not-for-profit Australian environmental conservation organization. It has been campaigning the negative social and environmental impacts of fast fashion. According to the group, 6000 kilograms of mass-produced fast fashion textiles are dumped in landfills every 10 minutes in Australia. As a matter of fact, the sustainability claims by H&M were taken as a case study. And the findings are having a sustainability policy and has a significant influence on consumer behavior. Nonetheless, looking at H&M’s comprehensive sustainability report, its ethical notion is evident in its reporting tools, values, and marketing campaigns.

Moreover, it is reported that H&M’s claims of sustainability are vague and misleading. For instance, the report stated H&M failed to provide precise consumer information about why these clothes are sustainable. For example, claims of using organic cotton are not sustainable as the production requires tons of water. In addition, it has limited information if H&M is engaging in sustainable manufacturing and sourcing. We check the H&M product catalog on their website, as an attempt for transparency. This is to factual check the sustainability claims of H&M. Indeed, the website includes the product background and the name of the supplier who produces the clothes. This includes the name of the factory and country of origin.

Sourcing of Cotton

H&M claims they achieve sourcing sustainable cotton at a 97% mark. This initiative was validated by Statista  an independent leader in the market and consumer data. Statista provided a breakdown of sustainable cotton use of H&M. Indeed it is at the 97% mark. In addition, H&M’s investment in Infinited Fiber Company and Re:newcell is a game-changer. Infinited Fiber Company is a biotech startup that can convert used textiles or any cellulose-based material. Such as used cardboard or agricultural waste into a biodegradable soft fiber. Aside from H&M, Patagonia, Wrangler, PVH Corp, and Bestseller have also invested in Infinited Fiber Company.

Sourcing of Wool

H&M completely phased out mohair and conventional cashmere. This is due to extreme animal cruelty in the cashmere industry in China and Mongolia. The H&M Group announced last year they will start sourcing cashmere through Aid by Trade Foundation’s new Good Cashmere standard. They are an independent organization setting the benchmark standard for a more sustainable cashmere sourcing.

Sourcing of Leather

H&M Group stops sourcing leather in Brazil as of 2019 due to the high risk of the Amazon rainforest. However, Swiss company Bomler stated that sourcing leather would never be ethical as it is derived from dead bovine animal skin. According to the H&M product catalog, leather goods are made from Leather Field (PVT) LTD in Pakistan. Looking at the Leather Field website, the company promotes sustainability, but information on the strategy is limited. On the other hand, Baptist World Aid Australia conducted an ethical fashion report in 2019. And Grant Thornton oversee the audit. Results reveal that H&M does not facilitate third-party ethical audits. However, the audit itself is unannounced towards their supplier. Although H&M indicated the list of factories and country of origin for their suppliers, Baptist World Aid Australia scored the brand with 0% to publish detailed indicators about each factory.

Chemicals

In the case of World Aid Australia, the group gave H&M a 100% score. This is because H&M is dedicated to eliminating hazardous chemicals in its products. In addition, they have a rigorous internal control mechanism in place.

Sustainable Packaging

The Ellen MacArthur Foundation is the UK registered charity that promotes a circular economy framework. Looking at the website, the foundation has different collaborations with industry leaders such as IKEA, Philips, Google, Unilever, promoting a 25% reduction in plastic usage by 2025. Though H&M highlights this target will be achieved, from my point of view, 25% is relatively low, considering how fast the industry is accumulating waste and sending it to the landfill.

Re-use/Recycle

The Clevercare label is a textile care labeling helping customers extend clothing life while saving energy and water. Regarding the Sellpy brand, selling pre-loved clothes appears to be a sustainable approach. Thus, H&M is committed to scaling this concept. It is reported that H&M opened the second store on June 30, 2020, in Germany, despite the COVID pandemic.

Sustainability: Impact of COVID-19 in the Fast Fashion Industry

H&M close 250 stores next year in response to the COVID-19 pandemic as sales start to shift online. In addition, consumer behavior will change drastically as clothing and footwear will decrease as people are working from home. For this reason, sales drop up to 70% across its major stores worldwide and slowly recovering at a 36% rise starting mid-April. The H&M supply chain poses a considerable risk as most of its supplier is from China, causing delays in orders and factories will still be working in a skeletal workforce.

For one thing, as of March 22, 2020, H&M Group quickly transforms its supply chain to produce personal protective equipment to be provided to the hospitals and health care workers. Indeed, one vulnerability that COVID-19 exposes in the apparel industry is the excessive inventory of clothes. Moreover, it is reported Bangladesh garment factories had lost nearly $3 billion in orders canceled as of March 31. Of course, the industry is appealing to the companies who have placed the orders not to cancel. So far, only H&M has pledged, according to the report.

Final Thoughts

Overall, H&M’s claims of sustainability are valid for their campaign. My aim is to provide a values audit report. And findings indicate that H&M is a leader in transforming the fast fashion industry. Evidently, the key initiatives towards Infinited Fiber Company and Re:newcell, a revolutionary technology closing the loop in the apparel sector. It is evident that H&M is experimenting with keeping its sustainability targets, and it is seen through simple initiatives such as the Clevercare label and the introduction of the Sellpy platform. H&M has also collaborated with different charities and not-for-profit organizations. Groups that are dedicated to sustainability like the Ellen MacArthur Foundation, Aid by Trade Foundation, Responsible Leather Round Table, and Responsible Cashmere Round Table, to name a few. H&M also participated and has signatories for different sustainability campaigns like Zero Discharge of Hazardous Chemicals (ZDHC).

One key finding that appears to be a flaw in sustainability claims is having a 3rd party or independent and unannounced audit towards their supply chain. Having another audit done by an independent party increases transparency in the supply chain and increasing the value for the brand. A greater focus now will be the challenges the fast fashion companies faced during the pandemic. Moreover, a swift change in consumer behavior accelerated the level of awareness for sustainability. Finally, H&M must adapt quickly without losing the sustainability campaign initiatives.

Reference List

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