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H&M : good substance, bad style

By Elaine Cohen (BeyondBusiness) on May 19, 2010 at 4:28pm.

Content:

There seems to be no stopping H&M. In the year following the financial crash of 2008, they opened 250 new stores around the world and increased their income and gross profit by around 14%. Clearly, the H&M formula seems to be working.  The Company was established in Sweden in 1947 and sells clothes, accessories, footwear and cosmetics in around 2,000 stores in 35 countries, and via internet and catalogue sales. In 2009, H&M also introduced online and catalogue sales of home textiles. A year ago, I reviewed the H&M 2008 report, the year in which the Company realigned its sustainability strategy and moved from a CSR approach to a Sustainability approach, in an attempt to integrate sustainability thinking and practices throughout the business. 

You can't fault H&M on transparent coverage of all of their sustainability performance areas. I notice a genuine effort to provide good levels of detail across the board. There is strong performance in many areas, including: the All for Children project, a five-year partnership with UNICEF to improve the conditions for children in cotton-producing areas in India, with a cash contribution of over USD 1 million from H&M; active participation in the Better Cotton Initiative including a USD 750,000 contribution;  strong progress in measuring water footprint AND supplier footprints as an element in H&M support for the CEO Water Mandate; a water reduction saving of 30% in denim production in Bangladesh; 79% of hangers used in store recycled; close to USD 5 million in community investment; a great Fashion Against Aids campaign to increase awareness and prevention; donation of over 500,000 garments to Helping Hands and others; over 2,200 factory audits in 2009 and more. H&M also has one of the highest proportions of women at ALL levels in the organization from the Board (56%) to Store Managers (78%) and others. No wonder their sales are growing!

Emissions performance could be a little stronger, with actual CO2 emissions for 2009 at 311,858 tonnes, an increase of 11% compared to 2008, just slightly lower than turnover increase in the same period (though since  2004, total emissions increased by 29% versus turnover increase of 88%).

The weaker elements of H&M reporting relate to materiality, stakeholder engagement and retail sales practices. The sustainability strategy focus is "every part of our products' life cycle, from the moment a cotton seed is planted all the way to the point that a product is disposed of, reused or recycled" which is broad, making it difficult to sense the material focus of H&M's operations. There is no discussion of materiality or the processes by which H&M have listened to stakeholders and assessed what matters most. Whilst H&M maintains participation in 11 global and regional multi-stakeholder initiatives including the (almost obligatory) leading associations such as the UN Global Compact, the Fair Labor Association, the Better Cotton Initiative (H&M is one of the largest cotton users in the world), the Multi-Fibre Agreement and more, there is no mention of broader stakeholder engagement with non-NGO groups. One gets the sense that H&M are doing much to control and improve their impacts, but that listening is not their strong point. Correspondingly, the contact point for feedback is an anonymous sustainability@hm.com .

There is no discussion at all in this report of H&M's retail practices, store placements, customer-facing impacts, economic impacts in areas where they are present, aside from sections that deal indirectly with sales personnel and environmental fittings in stores. I believe this is a complex area which H&M cannot ignore as part of their sustainability program. Interestingly, the word "supplier" is mentioned 337 times in the 88 page report, "product" 265 times, "environment" 159 times and "customer" a mere 69 times!

One point of note: The report is "dedicated to Erik Carlborg, H&Ms Regional CSR Manager in Shanghai, who passed away on 26 January 2010." A great way to show respect for a former colleague.

Communication:

H&M use of fonts and design elements in this report are somewhat of a distraction. Large sections written in capital letters make for tough reading, and the different sized fonts throughout the report are hard on the eye. For a report called Style and Substance, they seem to have focused only on Substance, which, I suppose, is not such a bad thing. Navigation is reasonable on the online site, but it is very "busy" every page contains numerous links to different sections, highlights or performance data downloads, and it's not easy staying on track to read this report online in a structured way. I resorted to downloading the PDF and reading that, plus several other downloads, to read the performance data.  Throughout the PDF are blue shared boxes entitled "Update" I wasnt sure what these add as the content refers to action taken in 2009, which is the subject of the entire report. Personally, I found this a little confusing.

Credibility:

H&M was ranked number 4 in the 2010 Global Most Sustainable Corporations list published by Corporate Knights, and received the PETA Proggy Award for animal-cruelty free garments. However, H&M has had its fair share of lows recently, including "Trashgate", the controversial dumping of deliberately destroyed garments outside a New York branch, handled badly by H&M in social media, confirmed presence of Uzbek child-labour-harvested cotton supplied via India and the discovery of genetically modified cotton in H&M "organic" garments, which all occurred around the turn of the year, perhaps just after the copy deadline for the 2009 report.

Clearly these are things to watch, and should place the issues of embedding sustainability through the business and traceability of raw materials high on the H&M list of priorities. H&M does address Uzbekistan cotton in this report, and we should all be well aware of the challenges for such a major player in managing a 100% sustainable supply chain. Nevertheless, whilst H&M's report should give us confidence that they are substantially and credibly on the right track, I do feel that some third party verification is in order, if only to assist in flushing out such issues before they become controversies. H&M state "We do not currently assure our report. While we recognise that some stakeholders appreciate assurance, we believe our resources are still best placed in furthering our sustainability work".  This doesn't fly. In my view, it is time for this global, rapidly expanding business (which operates with an 83 member in-house team for the advancement of sustainability practices, whose material issues impact on such a wide range of consumers, employees and outsourcing partners in the supply chain, in so many countries in the world, reporting every year since 2002), to bite the bullet and enable a third party assessment of their sustainability processes, the data they are presenting in their Sustainability Reporting, and what they are not presenting.


Recommendations:

1. Assure.
2. Revise the structure of the report and the online presentation.
3. Think materiality.
4. Listen more to more stakeholders.

elaine cohen is the Joint CEO of BeyondBusiness Ltd, www.b-yond.biz/en , a leading CSR reporting and consulting firm,  specializing in a wide range of consulting services for the development of social and environmental responsibility of businesses.