A. How did you find this company? What are the main facts about its activities?
H & M Hennes & Mauritz AB is a Swedish global retail-clothing company, known for its fast-fashion clothing offerings for women, men, teenagers and children. Comprises five independent brands: H&M, COS, Monki, Cheap Monday & Weekday, all offering different collections.
Their business concept is to give the customer unbeatable value by offering fashion and quality at the best price.
The company was established in Västerås, Sweden in 1947 by Erling Persson and now it has over 2,300 stores in 43 countries and as of 2011 employed around 94,000 people. It is ranked the second largest global clothing retailer, just behind Spain-based Inditex (parent company of ZARA), and leads over third largest global clothing retailer, United States based GAP Inc.
The design team in the company’s Sweden office controls the steps of production from merchandise planning to establishing specifications, and production is outsourced to approximately 800 factories in Europe and Asia. These facilities are used for horizontal division of labor rather than being integrated.
B. What are the Ethical challenges this company is addressing?
“Our vision is that all Business operations shall be run in a way that is economically, socially and environmentally sustainable.”
Even though the term “vision” (as seen in H&M’s motto) lends itself to be interpreted in an undefined, loose and unspecific manner, it only takes a quick glance at the retail giant’s web page to realize to what extent this “vision” has materialized in tangible actions, projects and pledges that, together, work towards the goal of a perfect coexistence between business and ethics. To start with, the company defines its business policy through seven ambitious commitments that have been designed to make sure H&M stays true to its mission statement:
1. Provide fashion for conscious customers
2. Choose and reward responsible partners
3. Be ethical
4. Be climate smart
5. Reduce, reuse, recycle
6. Use natural resources responsibly
7. Strengthen communities
Above all else, H&M considers that being “ethical” means “acting with integrity at all times” and in all of their activities. The idea is to “show respect” towards everyone who contributes to H&M’s success while taking a clear stand “against all forms of corruption”. As a result, the company is “giving back” to the community with the help of a proactive approach to a long list of ethical challenges:
Providing fashion for conscious customers:
H&M has made the intelligent business decision out of aligning their values with those of their increasingly socially aware customers. Even though the philosophy of the company is to “offer fashion and quality at the best price”, to them, the term “quality” indicates that their products should be “produced, transported and sold with care of the people and the environment”. In other words, their goal is to “inspire and surprise” their customers as they “become increasingly conscious of social issues”. This is achieved by adding “sustainability value” to the products they offer, especially thanks to their regular “Conscious Collections” (as well as a permanent range of “Conscious Products”) that are produced with the utmost attention to “greener”, more sustainable choices without “compromising on design or price”.
Choosing and rewarding responsible partners:
H&M does not own any of the factories in which they manufacture their products. Instead, production takes place at around 1,650 factories that are owned or subcontracted by almost 750 suppliers. Production is often located in countries where human rights violations are a risk and where environmental awareness is less developed.
Taking into account that “respect for people and the environment is an essential part of H&M’s values”, they use their influence to promote better working conditions and environmental consciousness throughout their value chain. In particular, they focus on strengthening their suppliers’ ability to “take ownership for their sustainability issues and on working towards greater involvement of the workers themselves”. The idea is to commit to choosing and rewarding responsible partners who share their values and who are willing to work with them and improve their social and environmental practices. Finally, according to the company’s web page, “this contributes to the stability in the producing countries and tends to translate to more efficient operations and higher quality products”.
Being climate smart:
The company recognizes that “climate change is one of the major challenges of our time” and that “as much as any other organization or individual on the planet” they have “an interest in taking action to tackle” the issue. The nature of their business means that the company consumes enormous quantities of energy for transport and electricity, but H&M strives to “be as energy efficient as possible” and to ensure that an “ever-greater proportion” of their energy comes from renewable sources. In the long run, the ultimate goal is to reduce their greenhouse gas emissions globally at a faster rate than that at which they are emitted by their operations.
In order to achieve this, H&M develops and supports emissions reduction initiatives by working with transport providers and supplier factories, raising awareness among the general public and by lobbying governments for stricter legislation. All this must be done while inspiring their customers “to play their own role in reducing the climate impact of buying and using our products”.
Reducing, reusing and recycling:
According to the company itself, “offering our customers fashion and quality at the best price means that we need to keep unnecessary costs down”. They address this by “making the most of the resources we buy and avoiding waste at every stage of our value chain” as well as by applying the three R’s to the processing of the waste generated by product packaging, shopping bags, store construction, etc. Here, the ultimate goal is to “send zero waste to landfill”. H&M even goes as far as to indicate that they “believe that our commitment to waste reduction should go beyond this. We also want to use our position as a major retailer to help our customers and business partners to reduce the waste that they generate”.
Using natural resources responsibly:
The company, as a large-scale consumer of natural resources (the access to which cannot be “taken for granted”), recognizes the importance of using these resources responsibly, considering the needs of both present and future generations. Growing scarcity “tends to mean rising costs, so resource efficiency will increasingly be seen as a source of competitive advantage” in the clothes manufacturing industry. All in all, in order to operate as a sustainable business, H&M is committed to conserving water, soil, air and species while trying to influence their customers and other stakeholders to help them use natural resources responsibly as well.
H&M is a part of many communities around the world, which include the places where the stores are located as well as communities along the supply chain. They recognize the scale of the impact their business model (which creates more than one million jobs) has on the development of these communities. This gives them the opportunity to drive positive change for both people and the environment and as a result, they make it a point to invest in projects that benefit communities and “at the same time address issues that are important to our business”.
H&M focuses its efforts on three areas:
Employment, education and health of women and youth.
Innovation of sustainable raw materials.
The three pillars that make this direct involvement possible are long-term partners in the communities themselves, a number of distinct community projects and ongoing community support. Furthermore, the results may also materialize in the form of cause-related marketing campaigns, donations of money and clothes to selected charity organizations or support in the event of major catastrophes.
Towards more sustainable cotton:
Cotton is the raw material that is used the most at H&M. The company’s aim is for all cotton in their range to come from more sustainable sources by 2020 at the latest. This means that the use sources that show consideration for people or the environment and those whose impact is less than the current impact of conventional cotton (such as Better Cotton, organic cotton and recycled cotton) are key to achieving this target.
The issue with cotton is that while it is a natural, renewable material with many advantages, according to WWF research, it takes an average of 8,500 litres of water to grow one kilo of cotton lint that will be enough to make one pair of jeans. In order to address this problem, in 2004, H&M launched the “Better Cotton initiative” (BCI). The BCI is a long-term multi-stakeholder initiative that develops and promotes good farm practices, allowing more cotton to be grown while reducing water and chemical use and protecting both working conditions and biodiversity. The initiative establishes minimum environmental and social requirements for cotton growing that must be met through a multi-stakeholder system that includes NGOs like WWF, clothing companies, cotton producer groups and trade and industry bodies.
The BCI has followed a strategic implementation plan until 2012, after which the system has been reviewed. It follows 10 major goals to be achieved during this period and among them, is the aim to produce 300,000 tonnes of cotton lint as Better Cotton, in Brazil, India, Pakistan and West and Central Africa.
H&M also takes pride in being the “biggest user of organic cotton in the world” taking into account that in 2010 they officially became the number one user of organic cotton worldwide (according to Textile Exchange’s Global Market Report on Sustainable Textiles). Organic cotton is cotton that, among other things, is grown without chemical pesticides or fertilizers, is not grown with genetically modified organisms and cultivation reduces the potential negative impact of cotton production on local water quality and biodiversity.
*Benefits of recycled cotton:
Reduced use of virgin cotton
Reduced use of chemicals, water and land
Can be used in blends consisting of up to 70% recycled fibres
All for Children:
All for Children is a five-year collaboration project between H&M and UNICEF. The aim is to protect children’s rights in cotton producing areas in Tamil Nadu, India. Child labor unfortunately still occurs within cotton production around the world. Since H&M does not buy cotton (H&M buys products straight from the factories) they can’t impose demands upon cotton and cottonseed producers. However, by cooperating with UNICEF they can help address the causes of child labor and improve the situation of children in cotton-producing areas.
The All for Children project focuses on five specific areas:
Addressing child protection policies and structures
Health and nutrition
The aim for the All for Children project is to get children out of work and into school and improve access to health and nutrition care. The project’s overall focus is on the 1.2 million children up to 14 years of age in Salem and Dharmapuri districts in Tamil Nadu in southern India. Special focus is be given to 300,000 children up to the age of 14 belonging to vulnerable communities and an estimated 35,000 working children in the cotton fields, as well child laborers working in other sectors.
Workers’ awareness in Bangladesh and India:
H&M wants their suppliers to be in charge of their own sustainability in the long run. To achieve this, the employees hired by these suppliers must be involved in order to know their rights and how to claim them. Through short educational films and in collaboration with local NGO’s, since 2008 more than 440,000 workers in Bangladesh have received training on their rights at work. The films tackle a wide range of issues such as, maternity leave, documentation, abuse and grievance, health and safety or overtime. Day-to-day scenarios are shown and suggestions are made on how workers and managers should deal with situations that might arise.
Water conscious denim:
Rinse-washing denim garments to achieve a desired finish is a water-intensive process. At H&M they work with their suppliers in order to apply better techniques, reducing this water use. First trials in 2009 showed that process optimization can deliver water savings of up to 30%. In 2010, denim was produced following this approach on a greater scale and savings of approximately 50 million litres were achieved in relation to previous production methods. A target of achieving 100 million litre in reductions by 2011 was set and by introducing these techniques on a broader scale 300 million litres have been saved so far.
Each year, H&M donates large quantities of clothes to aid organizations in countries in which the company operates. Garments that are donated include samples and clothes that do not comply with H&M’s quality requirements. Even though, in 2011 alone, H&M donated more than 2.3 million garments to charities, they do not give away clothes that do not meet with safety requirements and chemical restrictions. The current policy on this issue states that “all unsold products should be donated to charity or, if possible, be recycled into something useful”. The charities chosen must meet basic criteria and provide H&M with a report that specifies the amount of goods received as well as how and where the goods have been used.
C. What makes this company really inspiring to you and why would you trust it?
Once you come into contact with H&M’s philosophy and the way they do business it is not difficult to understand why the company is often ranked highly together with other corporations that are known for their strong ethical standards. The way H&M’s policies on social issues and the environment are presented on the company’s web page hint at the retailers’ preoccupation towards the ideas of transparency, education and customer interaction. As a result, for example, H&M, like most (if not all) major companies in the 21st Century, uses social media to their fullest extent. The company itself states that “through social media, H&M can inspire, inform and interact with customers, wherever they are in the world”. H&M’s presence on Facebook, Instagram or Twitter aims to ensure customers are able to share ideas and get quick answers to their queries, which indicates that the company is willing to take part in an honest and transparent dialog with their customers and the community as a whole.
Furthermore, H&M seems to consider the follow-up and “after-care” of their various projects as a top priority. As a result, reports such as the “Conscious Actions Sustainability Report 2011” are carried out. This particular report contained the 7 goals we mentioned earlier and according to the company’s press release:
“With size comes responsibility and influence. I want our customers always to feel that we do our best to ensure that the fashion we offer has been made, transported and sold responsibly. To achieve this, transparency is key and our Sustainability Report is an important tool to show our progress and challenges,”
Karl-Johan Persson, CEO at H&M.
Finally, H&M also makes sure their initiatives, programs and campaigns are controlled by audits. For example, a specific audit program was set up in order to focus on the improvement of the traceability of conventional cotton in order to ensure that top-tier suppliers and their subcontractors use organic cotton that meets with H&M’s sustainability standards. Audits were also carried out in relation to the educational films shown to workers in India and Bangladesh (they showed encouraging developments in compliance rates related to the issues covered in the films).
D.What are the possible challenges facing the company in the future and how do you think this company may improve?
We focused on three challenges that in our opinion H&M will have to face in a very near future.
The first one is related to what Camilla Emilsson - Falk (head of media relations for H&M) confirmed the last 30th of March, she said that H&M is planning for the next spring to launch its first luxury brand, it will be a bit more expensive but it will also have better quality.
H&M is known for selling fashion at the best price therefore this new luxury brand does not really fit with their business concept.
Consequently the customers of H&M might not understand the new brand, this it could be a challenge for the organization because their customers search fashion clothes but at the best price. In order to overcome this challenge we think that H&M has to focus this brand onto another type of customer and the most successful way in our opinion could be to totally separate this new brand from the H&M brand because if not it could be a contradiction to their typical business concept.
Secondly, some days ago it was published that, among other fashion brands, H&M is accused of of underpaying their Cambodian workers and also of having bad factory conditions.
In August 2011 nearly 300 workers passed away in one week at a Cambodian factory supplier due to fumes from chemicals, poor ventilation, malnutrition.. and all because of the bad factory conditions.
The minimum wage in Cambodia is more or less 66$ a month, human rights organizations say it is almost half of what would be required to meet basic needs. This is why workers try to work 10 to 13 hours a day to obtain the money they need for their family.
If these circumstances were to become public, it would be really harmful for the corporate image of H&M.
In order to face this challenge, we think that it would be important to monitor their suppliers and require a minimum level of good conditions in their factories and to also ensure that this suppliers pay a minimum wage to their workers, because if not they are not respecting human rights and it is also harming their corporate image.
Finally, the last challenge that we want to talk about is a typical case in the fashion industry. H&M has been accused of using underweight models in one of their collections and also in another collection for using models that are too tanned. They have even begun using “completely virtual” bodies pasted onto real girl’s heads to model the clothes on their site.
Which model is the correct one to show their clothes? this question probably is really difficult to answer in this industry and it is a challenge for them now a days and of course for the future.
In our opinion, they would have to ensure that their models have a minimum weight more similar to the weight and sizes of their customers. If they use a model more similar to their real customers, these customers are going to identify themselves wiht the models in particular and will be more likely to buy their products.