H&M and Climate Change

I: H&M and its Business Environment

H&M is a Swedish multinational retail company. It operates in 74 countries and has over 5,000 stores for the company’s various brands, which span clothing, jewelry, home, and more. Its focus is clothing: it is the second-largest clothing retailer globally.

H&M focuses on fast fashion. This retail segment is highly competitive due to price competition and the need to constantly tweak product design to meet market trends. This pace exacerbates the climate challenges of the retail industry, which overall is resource-intensive. Clothes producers put particular strain on water resources and there has been relatively limited investment in new technologies that could reduce the industry’s climate footprint.

 

II: H&M’s Response to Climate Change

Given the increasing pressure from customers, activists and media outlets, H&M has invested heavily to improve its sustainability and the resilience of its operations to climate change. 

In 2017 H&M announced the goal to be climate positive by 2040. This means that the company aims to have a net reduction in CO2 emissions throughout its entire value chain. To achieve the target, it has undertaken initiatives broadly clustered in two main axes:

• Reduction of energy and resource needs
• Use of renewable energy sources, wherever possible

A key driver of H&M’s emissions is its core business of fast fashion. The company’s apparel price, quality and durability is relatively low, which leads to consumers buying cheap clothes and only wearing them a handful of times. In addition, to keep up with rapidly changing fashion trends, H&M changes its in-store assortment rapidly. The combination of this “disposable fashion” consumer behavior and inevitably high unsold inventory leads to high emissions from the overall value chain, as H&M needs to constantly manufacture (and ship) high volumes. 

Two ways that H&M is reducing that impact are based on circular economy models. The first is to offer in-store after sales repairs, like its Take Care initiative, which gives consumers access to sewing machines and materials in certain flagship locations. Second, the company is focusing heavily in recycling, by offering consumers a discount on new purchases when they bring back used clothes in-store, and by investing innovative technologies. These include investments in, and partnerships with, startups whose technologies improve the yield of usable recycled fibers, improve the cost-efficiency of recycling, or enable the recycling of difficult-to-repurpose fabrics like cotton-polyester blends. 

In addition, H&M has made significant improvements in sustainable cotton sourcing. This includes purchasing and using a higher proportion of recycled cotton, supporting (and incentivizing) organic cotton agricultural practices by their suppliers, and partnering with industry groups such as the Better Cotton Initiative. This has enabled H&M to ensure that 97% of the cotton it uses is sustainable, and that 57% of its overall raw materials are sustainable. 

Finally, H&M is launching a global packaging reduction and optimization initiative in partnership with the IDEO CoLab. This aims to reduce waste through standardized packaging using recyclable materials, including by eliminating plastic, and to reduce the carbon emissions caused by packaging (including production and shipping effects) through the company’s supply and distribution chain. 

 

III: What else should H&M do to respond to climate change?

H&M has made strides to combat climate change, but the broad nature of its business also impacts areas where it has yet to make real effort. We identify two as immediate concerns.

First, it should renew efforts on sourcing sustainable materials. It is impressive to have achieved 97% sustainable cotton… but only 57% of H&M’s overall materials use is sustainable. H&M must make a similar scale investment in sustainable sourcing for all materials it uses, building on its success in sustainable cotton.

Second, H&M should scale efforts to address water usage. It is not good enough to say “we have some way to go”, as the CEO stated in 2019. This is especially urgent considering the water issues in the countries where they produce clothing. The WWF partnership is a good step, but H&M should invest more internally as well, including in developing technologies to reduce its water usage in production.

Beyond these concrete areas, we also wonder if H&M should rethink its business model. Fast fashion as a concept relies on heavy production and consumption. We believe that this model can only be sustainable if changes are explored.

To start, H&M must become truly circular. This could work if they made all H&M Group brands interlinked. Material could be up- or down-cycled so that the Group as a whole is a self-contained organization. The variety and volume of products produced by the H&M Group, which span clothing, jewelry, home, toiletries, and more, give the company room to create such a closed ecosystem. To pursue this, though, H&M will need to carefully plan its product mix. If materials are out of kilter (eg there are not enough second-order uses of cotton to accommodate the scale of cotton produced and used in H&M t-shirts) then the Group will be, by definition, not circular.

Secondly, H&M needs to invest more heavily in its recycling capacity. We noted with concern that the percent of stores with “recycling systems for main types of store waste” declined from 2016-2019 (from 71% to 62%), suggesting either that the number of recycling areas declined or new stores were built without recycling facilities. At minimum all expansion should be done to peak recycling standards.

Furthermore, even though H&M is increasing recycling collection capacity, investing in their own recycling facilities would bring the recycling process closer to clothes production and enable shorter recycling cycles between clothes production and the vast amounts of trimmings that become industrial waste. The investments H&M has made in start-ups in these areas are a start but should be scaled up with a focus on making these new technologies and business models a core part of H&M’s operations.