The fashion and textile industry is the second largest polluter in the world, second only to oil[1]. Synthetic fiber production and the dyeing process use hazardous chemicals like PFCs, which can severely impact the environment. Additionally, the EPA stated that 15.1 million tons of textile waste was generated in 2013, of which 12.8 million tons were discarded[2]. As the textiles degrade, they produce potent greenhouse methane gas which the EPA estimates to be the environmental equivalent of carbon dioxide emissions from 7.3 million cars[3]. Voracity for fast fashion does not appear to be slowing down anytime soon. However, this energy-intensive process of producing today’s fashion only to become tomorrow’s trash is surely not a sustainable practice. As climate change continues to become a bigger topic, big players in this industry will likely be affected through government regulation and shortages in raw materials.
H&M environmental controversies
One big player is H&M, a Swedish fast fashion brand that generated +$21.7B in revenue in 2016 (highest only after Inditex). In the past, the fashion giant has dealt with several environmental issues in the press, including one involving Green Peace’s claims of river pollution in China in 2012. While these issues touch all players in this industry, H&M has gained the most notoriety simply because of the sheer volume of fashion it generates. To survive as a business, it must make tradeoffs between cheap fashion and ethical production. Possible strategic directions include:
- H&M focuses 100% commitment on sustainable practices
- H&M focuses on a balance between profit and progression towards sustainability but will cut corners
Additional questions to help identify the proper strategy include:
- Do customers care about sustainability?
- What are the costs, incremental sales lifts and profit margins?
- Does H&M raise prices?
- Will another green fashion brand gain market share?
- What are the advantages to being a first mover in this space?
The first strategy is much more difficult to pull off. However, H&M could set itself up for success by emerging as an early leader in setting the precedent for ethical fashion.
How has H&M addressed sustainability?
In recent years, H&M seems to have taken numerous steps in this very direction, including:
- Increasing transparency (one of the first to release its list of suppliers, annual sustainability report with concrete goals and updates)
- Implementing sustainable practices (created “Close the Loop” campaign encouraging
customers to return gently-used clothes to stores for a discount, launching green collections)
- Supporting innovative ideas and technology (awarding grants through Global Change Award).
Due to its focus, H&M has recently gained a positive reputation in the sustainability space. The firm even jumped from 75th to 20th on Corporate Knight’s latest Global 100 Index, a ranking that recognizes international companies’ sustainability efforts[4].
Opportunities for H&M to improve its business model
While the company has made tremendous progress towards sustainability, there are still opportunities to further improve its green initiative. Proposed opportunities include:
- Improving textile recyclability (to account for >50% recyclability)
- Refining the “close-loop” process so it’s more sustainable
- Expanding its green collection as it currently only represents a tiny percentage of its overall business
- Identifying ways to rely less on volume without sacrificing profits (e.g. garment repair services, new garment technology).
For instance, critics have questioned how impactful the “Close the Loop” recycling program is. Even Green Peace has commented, “H&M’s Recycling week is in reality a week of illusions since only one percent of collected clothing can be used as recycled fibers”[5]. Moreover, H&M’s recycling program comes off more as a marketing campaign. For instance, it incentivizes customers by providing a $15 voucher in exchange for the used clothing. This voucher is just enough money to motivate the customer to buy another piece of clothing. The sustainable impact of this program is iffy since it fights textile waste by enticing customers to buy more while the firm continues to produce massive volumes of cheap, easily disposable clothing. H&M’s primary sustainability challenge is in fact the volume of garments it produces, which directly contradicts its business model. Without significant improvements to textile recyclability and the “close-loop” process, the sustainability of H&M’s volume strategy in the long-term is questionable. Additionally, H&M should diversify and consider alternative profit-generating methods that are less reliant on volume, such as offering a garment repair service, developing technology that can dynamically change designs on the same piece of clothing, etc.
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[1] https://www.forbes.com/sites/jamesconca/2015/12/03/making-climate-change-fashionable-the-garment-industry-takes-on-global-warming/#792a33879e41
[2] http://www.npr.org/2016/04/08/473513620/what-happens-when-fashion-becomes-fast-disposable-and-cheap
[3] http://www.newsweek.com/2016/09/09/old-clothes-fashion-waste-crisis-494824.html
[4] https://sourcingjournalonline.com/kering-makes-corporate-knights-global-100-index-hm-jumps-in-rankings/
[5] https://qz.com/662031/is-hm-misleading-customers-with-all-its-talk-of-sustainability/
I feel that expecting H&M to adopt any other business model other than its incumbent volume driven low-cost model is unrealistic. H&M’c competitive advantage is principally a low cost sourcing model and I am not sure how easy it would be for them to reinvent that. I would actually love to dig deeper into this and really try to follow the money trail i.e. for an average garment sold who gets what. How much of that money goes to H&M, how much goes to the sourcing agent, how much goes to the foreign manufacturer, and how much goes to the worker? Such analysis can give us a clearer picture of where the margins can be cut to give more benefits to the workers. But even then, we have to ask ourselves, what do we need to do to make sure that benefits from cost-savings in the value chain does trickle down to workers successfully? And how can consumers keep companies like H&M accountable in that regard. Also consumer education broadly is important, as many would buy the cheapest garment without any regard for how it is sourced.
Thanks for the post!
Very interesting the proposed target of improving textile recyclability to more than 50%; it would be interesting to know their current % of recyclability and the steps they need to take to achieve that target.
Wonder if H&M is also taking steps in developing less greenhouse methane gas emitting textiles and manufacturing processes.
Very interesting article.
While I was doing research for my article on Fast Fashion, I came across H&M’s pioneering sustainability initiatives many times.
It will be intreaguing to watch how a company like them will deal with this issue. The mixed composition of their synthetic fibers rarely allows them to recycle. On the costumer’s side, it is risky to see how a company that relies so much on volume could start charging a premium and not lose sales.
The more I think about it, the more it seems like sustainable fashion is a niche business, at least for the short term. (I hope I’m wrong, though!)
On a side note: I have been seeing increasingly more pieces with the “conscious” green tag in H&M’s stores.
This post reminds me again that with scale, it becomes harder to manage wastes and environmental impact.
With a company like H&M, it seems very challenging to be 100% sustainable. The operations are focused on quick, mass production on a global scale. The products are cheap so it makes it harder to be selective in sourcing materials that may support a more sustainable operation. Furthermore, recycling does not seem to be a viable solution based on Green Peace’s statement.
These facts lead me to agree with the last point made on your post about leaving fast fashion and finding other services to move away from such a volume heavy business.
Perhaps one way to find solutions for companies that are extremely harmful to the world’s environment is to question the real need for their products or services. Do we really need fast fashion or can H&M still provide clothes or fashion related services to achieve its mission and become a more sustainable business?
I’ve read different estimates on how much textiles can actually be recycled. This segment is still growing, also in response to fast fashion continuously dumping billions of garments on the market, and there isn’t much reliable data available yet. However, if you’re curious (like me!) here are two links with further information:
https://www.thebalance.com/the-basics-of-recycling-clothing-and-other-textiles-2877780
http://www.ethicalfashionforum.com/the-issues/recycling
Very interesting article! Being an avid consumer of fast fashion myself, I certainly value that companies such as H&M have started to think about how to embrace more sustainable practices.
Reflecting on this I was wondering that maybe companies such as H&M could implement supplier screening initiatives, reinforcing those players that use eco-friendly manufacturing processes. If the biggest players in the market agree to penalize those who are not following these practices, new market standards would definitely arise.
H&M’s “Close the Loop” campaign is a very interesting initiative, and I like the article points out both sides of the story. While it seems that it is a good way to reduce waste, it may incentivize customers to buy another piece of clothing, turning it from an environmental campaign to a more marketing one. As I reflected on its waste management, I was wondering if it is possible to collect and resell those second-hand clothing to other developing countries at a cheaper price. To make it more effective, it may partner with some NGOs who are specialised in this area.