Analysis: How H&M is leading the way in sustainable fashion

When the Rana Plaza building in Bangladesh collapsed a year ago, tragically killing 1,138 workers, shock waves were felt through the global fashion industry.

Some of the world’s biggest apparel retailers used suppliers based in the factory and as a result their supply chain practices have come under huge scrutiny.

However, there was one notable name missing from the list of retailers that came under fire, and that was because of its already robust sustainability and ethical stance: Swedish giant H&M, one of the largest fashion retailers in the world.

More than most of its peers, H&M has for many years strived to put sustainability at the heart of everything it does. The retailer says it is investing heavily to secure better lives for those who work in the factories it buys from, and it was the first retailer to create a far-reaching strategy to improve the lives of textile workers in developing countries.

One of its priorities is to ensure workers earn a fair living wage. Speaking at the retailer’s global headquarters in Stockholm, H&M’s social sustainability manager Anna Gedda says the retailer is leading the way. “We’ve been working on wages for a long time,” she points out. “We have seen progress but it’s been a bit slow. It’s the single most important question on sustainability, across the industry and definitely for H&M.”

H&M’s ‘fair living wage’ initiative aims for its strategic suppliers to pay their employees enough to live adequately on by 2018, affecting 850,000 textile workers.

“We were the first brand to come up with this kind of plan, a holistic roadmap towards achieving something like this,” says Gedda. “For us it’s a long-term investment. If we want to be able to expand or grow we have to do it in a sustainable way.”

Fair Wage Method

The retailer has launched trials in three factories in Bangladesh and Cambodia, where it has implemented the Fair Wage Method, a model whereby wages reflect skills and experience and salaries are regularly negotiated.

H&M has committed to buying stock from the trial factories for five years, to “give them security”, according to Gedda. It will assess the results after 12 months. Environmental initiatives will also be tested further down the line.

To further improve relations between the factory managers and the workforce, in March the retailer opened an H&M Training Institute in Dhaka. The retailer wants to train its suppliers in Bangladesh to encourage  dialogue between management and workers. This year it wants 15% of its suppliers to be trained in ‘social dialogue’ and to install freely elected Workers Participants Committees. By 2018 it wants to put all its Bangladesh suppliers through the training.

H&M is also launching a Centre of Excellence in Dhaka, in partnership with the International Labour Organisation and the Swedish Development Agency. The three-year project, which starts in the autumn, is intended to provide vocational training that “meets textile industry needs and at the same time drives wages”.

About 5,000 students will be trained through the centre by 2016 as H&M aims to help plug the skills gap in Bangladesh. It says there is an estimated shortage of 250,000 skilled textile workers in the country.

“We want a sustainable solution, not a quick fix,” says Gedda. “Our vision is that all suppliers should pay a fair living wage. They should be able to live on the wage and the wage should be established by fair practices.”

If its wider plan is to succeed, Gedda says H&M needs to engage suppliers and their employees as well as governments, NGOs and trade unions. But she also says the retailer needs the support of peers. H&M cannot do it on its own. “It requires collaboration to reach the whole industry,” says Gedda.

“We hope it’s going to set an example for the rest of the industry. We have a lot of discussions with other brands. We hope the industry is going to follow.”

Sustainable influence

She believes H&M is better placed than many to drive change and says the retailer has an obligation to lead the charge. “With size comes a responsibility and an ability to influence,” she says. “We have the muscle to be able to carry it out. Smaller companies may not.”

Gedda, clearly passionate about forcing sustainability up the agenda, is lucky in that she has a boss who is as dedicated about it as she is.

H&M chief executive Karl-Johan Persson went to Bangladesh in 2012 and Cambodia in 2013 to push the sustainability agenda. “There’s a very clear commitment from the top,” says Gedda. 

Persson said last month: “We take a long-term view of our business, and investing in our sustainability means investing in our future.”

But if H&M, a leading fast fashion retailer, is having to plan further in advance, will it be able to react quickly to trends in the market?

Emphatically yes, says Gedda. “We’re forcing ourselves to plan better. We can keep the flexibility. We will ask ourselves what item do we need more flexibility on?”

H&M is clearly making a big investment in sustainability – although Gedda declines to put a figure on it – but is it really what value-conscious customers want, and will the costs be passed on to the consumer?

“This is not a PR initiative for us. It’s important for our customers, we see this as an investment in our customer offer,” Gedda insists. “We want our customers to know we take responsibility.

“We’re willing to pay suppliers more. We don’t think it will have a negative impact on the prices customers pay. It’s a shared responsibility between us and the suppliers. There are productivity and efficiency gains.”

Convincing suppliers

H&M is building a business case to convince suppliers, but it is also being firm – if they refuse to conform, H&M will not do business with them.

“It will be a requirement for us,” says Gedda. “But it is challenging trying to convince them.”

Gedda argues there are wider benefits of delivering a living wage, highlighting the recent high-profile protests in Cambodia and Bangladesh, when workers went on strike against low pay.

She observes that in those factories with strong employee practices, there were no strikes. “That alone is a business case to the supplier,” she says.

Gedda says the Rana Plaza disaster was a wake-up call for the industry. She and her colleagues were “devastated” when they heard of it. “Everyone in my department had been to Bangladesh a number of times,” she says.

But something good came of the tragedy: Gedda is convinced it was a turning point for the industry. “We’ve seen the emergence of the Accord and Alliance [safety initiatives] and we now have a standard on fire safety. That is a great result,” she says.

The wider industry agrees H&M is leading the way. In March it was named one of the world’s most ethical companies by the Ethisphere Institute.

And after releasing its sustainability report in April Janet Mensink, the international programme coordinator Cotton & Textiles for Solidaridad Network said: “H&M’s commitment to sustainability and the transparency on targets and achievements serve as an inspiration for other brands in this sector. Considering the fact that H&M sources from 1,900 factories reaching 1.6 million people, the potential for change is immense.”

H&M and its peers in the fashion industry seem determined to ensure that the potential for change becomes a reality.