Content:

I love the textile, apparel and fashion industry and it's a fascinating way to review corporate responsibility and sustainability with its significant impacts throughout the product life-cycle on environment, and a wide range of social issues throughout the supply chain. Anyone who has read Rivoli's “Travels of a T-Shirt in the Global Economy", or Harney's "China Price" or Sandy Black's "Eco Chic" will know that un-sustainable fashion and global mass market production have given rise to a series of concerns which require systemic change in this industry so that we can all dress with an easy conscience. From fast fashion to fatally anorexic models, contractor auditing to organic fabrics, low-temp wash fabrics to community trade, ethics versus comfort, quality versus quantity, chemical versus natural dyes, animal based products, recycling, refashioning, reusing … the list goes on.

H&M, a seriously successful Swedish retailer (opened 214 new stores in 2008 and maintains significant expansion plans into new territories, despite the credit crunch!), starts its report with a bold statement: "keeping prices low does not need to be contradictory to acting responsibly." So I was intrigued to see how this fashion retailer, whose previous reporting has been outstanding, continues to rise to the challenge. In practice, H&M does cover all these material issues, including reference to second-tier suppliers (suppliers of suppliers), auditing standards, home-working and more, though there is no evidence of a structured materiality analysis. Environmental impacts are covered comprehensively, including a brief reference to impacts at the downstream life-cycle end (after purchase). Sustainable fabrics (aside from organic cotton) are relegated to a brief paragraph about future possibilities. Nice to read about H&M's first social marketing campaign to support HIV/AIDS issues.  I suspect this type of campaign will feature more highly in H&M's marketing approach in the future.

2008 sees the announcement of a new sustainability strategy, after 11 years on the journey. The strategy is made up of a vision, a policy and 2 long-term goals around human rights and environment. The key change is the move from an HQ driven approach to an HQ support approach where responsibility is driven by the business departments and units. This seems directionally right, together with the global 86 member CSR Team, mainly employed as supply chain auditors.

What strikes me as I look through the two sections called “global non-compliance issues and remedial actions" in H&M's supply chain in the Far East is this: H&M list a range of issues where they are non-compliant. Now, CSR is generally understood to be about beyond compliance, and here we are, after many years of CSR activities at H&M, reading a social report from a business whose greatest stretch is to reduce the levels of non-compliance in these areas. Firstly, I applaud H&M for their disclosure. Secondly, I understand how complex this process is and thirdly, this just doesn’t seem bold enough. The nice touch here, though, both for these and for new social and environmental targets is the specific commitment and names of the people responsible for implementation. This public declaration of single-point accountability within H&M for ensuring things happen testifies to the use of the CSR Report as a management tool as much as a reporting tool. This is very encouraging.

Communication:

I must say that the on-line report is not so easy to navigate. The report sections are integrated with H&M's main website and there is a disconnect when you move between the two. I had to work with several windows open in order to be able to keep track.  The mini-site format means that the windows are not in sync so that you have to keep scrolling around in order to read beyond the headlines of each page.  I preferred to stick with the pdf download which is a mirror of the mini-site but at least everything is in one place.  But this is a minor irritation as the report is presented clearly and is well structured.

Credibility: 

This is a GRI self-declared application level ‘B’, and includes the Apparel Sector Supplement. It does very well against these frameworks.
One of the ingredients for a credible report is the inclusion of the challenges and difficulties the business has faced, and criticisms of the business. The disclosure that H&M ‘terminated’ 10 employees in 2008 due to code of ethics breaches is an important statement. I don’t recall many reports giving numbers such as these. The stakeholder feedback section contains points for improvement which are insightful and largely point to the transparency of H&M's  supply chain – I would endorse this sentiment – H&M appears to have made major progress, including over 2,500 factory audits in 2008. Over 40,000 employees in Bangladesh have been trained using a training film on worker rights and there are other examples, but H&M stops a little short of the finishing line. H&M chooses not to assure – due to resource allocation - but this is exactly where assurance could mitigate a certain lack of transparency. I would think that it was about time for H&M to come off the fence on assurance. 

A factor which supports H&M 's credibility is the company's membership of regional and global initiatives such as the Global Compact, the Multi Fiber Agreement, Fair Labor Association, CEO Water Mandate, Organic Exchange and more. It’s pretty impossible to be hooked up to all these groups without being both transparent and committed. The spotlight shining on the organization is always present, from one direction or another. I suspect this will continue as H&M continues its rapid business expansion.  

Oh, and as a feminist, any company that has 76% of women in management positions including 33% at Group Management Level automatically gets the thumbs up in my book.

Recommendations:

1. Move towards assurance
2. Disclose supply chain details especially supply chain auditing
3. Give a greater sense of context for materiality issues – eg where are the pressures and risks and what are considered to be the highest priorities from a multi-stakeholder standpoint.
4. Review opportunities for greater employee involvement in community activities (not really discussed in this report)

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