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Is H&M the Most Ethical Retailer in the World?

Mega-retailer H&M, increasingly known for its commitment to social compliance, just released its annual report on sustainability, an encyclopedic reckoning of the company’s initiatives over the last year.

The ninety-two page report, “H&M Conscious Actions: Sustainability Report 2013,” details the company’s public march toward global compliance on a broad swath of issues including ecological sustainability, labor conditions and wages, supply chain efficiency, the use of raw materials, corruption, diversity and equality, and several more.

H&M defines its devotion to compliance in terms of seven core commitments:

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.

H&M’s report is centered around an account of innovations regarding its supply chain. “H&M Conscious addresses impacts, opportunities and challenges where they occur along our entire value chain. For those that are most closely related to our own operations, we have the ability to directly influence the impacts we have. For others, we make a difference, for example, by choosing conscious raw materials or like-minded partners and by collaborating with others.”

Only by controlling and supervising every link in that chain, according to the report, can H&M ensure that true sustainability, in all its various meanings, is achieved. “Sustainability starts at the drawing board. We need to create fashion without compromising design, quality, price or sustainability. Knowing how our choices of materials and looks impact the environment and people right from the start is the name of the game — just as minimizing what ends up on the cutting floor.”

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Such a comprehensive strategy necessarily includes the systematic scrutiny of design, raw materials, garment production, product transport and even an anticipation of a product’s use. The use of a garment might seem outside the perimeter of what a retailer can reasonably control, but H&M thinks otherwise. “The way our customers do their washing represents about 26% of all the green- house gas emissions in a garment’s life. Our challenge is to create affordable fashion that our customers will love from season to season and that is easy to care for in a low-impact way. And we need to inspire our customers towards conscious garment care and make it easy for them to not let fashion end up in landfills.”

Garment production, historically plagued by environmentally depleting inefficiencies, is the central pillar in H&M’s plan. “Ensuring high social and environmental standards with all of our 872 suppliers can be a challenge especially in terms of complex industry-wide issues such as wages, overtime and safety. We not only monitor factory compliance but also train our suppliers and their workers, promote social dialogue and collaborate with organisations such as Better Work, the Fair Labor Association (FLA) and the Fair Wage Network.”

The report provided a succinct statement on H&M’s view of its own “mission” with respect to supply chain management. “We have high expectations of our suppliers in terms of quality, prices, lead times and sustainability. That said, creating a sustainable supply chain starts with us. We have experienced great improvements and over the years, we have developed advanced systems for managing our supply chain and supporting its sustainability performance. And we work to improve it further every day. For example, to make sure that we choose the right partners from the start and that we know exactly where and under what conditions production takes place. Throughout a partnership, we need to enable, promote and reward constant improvement. We are aware of the limitations and challenges in standard audit procedures, and faked records or undeclared subcontracting do, unfortunately, occur in our industry. We do not accept any such practices and work systematically to prevent this.”

H&M is likewise committed to lifting the wages of those who labor in their factories. “There is no question that every garment worker should earn enough to live on. In order to ensure this throughout our industry and in all of our sourcing markets, further systemic change is needed.” That change is partly delivered in the form of additional payments to suppliers. “H&M continuously makes sure that the prices we pay our suppliers enable them to pay fair living wages to their workers. By 2015, develop additional tools to systematically ensure this also when wages increase in the future.” Making fair wages into a reality requires an actionable plan that’s practically, and cost effectively implementable. “By 2014, [ we will] implement fair Wage Method in 3 model factories and evaluate outcome. By 2018, all of H&M’s strategic suppliers should have improved pay structures for fair living wages in place. By then, this will reach around 850,000 workers.”

H&M CEO Karl-Johan Persson was forthcoming regarding both the challenges and missteps the company has confronted. “We always want to improve in everything we do. We are certainly not perfect. For example, we always strive to create advertising campaigns that convey a positive and healthy look. I think we always need to keep working to ensure that we deliver this in all our campaigns. There are of course many other challenges that we continue to tackle in our own business, our supply chain or in our entire industry.” When asked to address a specific difficulty that demands resolution, he said, “For example, further innovation is needed to make quality garments entirely out of recycled fabrics from collected garments. Too much overtime remains a common issue in many supplier factories. There’s much more to do — especially when it comes to issues with systemic root causes in our industry and the countries that we operate in.”

Speaking about the Rana Plaza tragedy, the one-year anniversary of which fast approaches, Persson discussed the moral obligations the apparel industry collectively bears. “And we all still have the pictures of the terrible accident in the Rana Plaza building in Bangladesh in our heads. At H&M, we did not have any production in the building. For many years, we do not allow for production in any multiple party buildings, but our entire industry has a responsibility to ensure that nothing like this will ever happen again.”