Spotlight on...H&M sustainability report
For sceptics who view corporate social responsibility as being more about talk than action, a look through the 167 pages of the latest sustainability report from Swedish retailer H&M Hennes & Mauritz AB provides a valuable insight into just how seriously some fashion firms take their obligations.
"With size comes responsibility and influence," explains Karl-Johan Persson, CEO at the retailer which operates around 2,200 stores across the world. "We want our customers always to feel that we do our best to ensure that the fashion we offer has been made, transported and sold responsibly."
Of course the company acknowledges that such an approach makes sound business sense, but what's also interesting is the work H&M is doing with its suppliers to take a lead on the sustainable production front.
The retailer does not own or operate any of the factories producing its goods, but instead works with around 700 suppliers in 30 countries, mainly in Asia and Europe.
Yet its goal is to broaden its scope to take into account every part of a product's life cycle. So in 2010, for example, it imposed a global ban on the use of sandblasting on its products - but also further down the value chain it is increasingly involved in areas like fabric production and even raw cotton supply.
H&M wants all its cotton to come from more sustainable sources by 2020, and used 77% more organic cotton last year than in 2009 (a total of 15,000 tonnes). But its involvement in the Better Cotton Initiative (BCI) has also helped educate a total of 68,000 cotton farmers on more sustainable farming practices.
"We have started to look at the carbon and water use impact of our products across their entire life cycle," head of CSR Helena Helmersson explains. "In the future, being at the forefront of sustainability will mean aiming both to be carbon neutral and to produce zero waste."
H&M last year saved 50m litres of water in denim production after working with its suppliers to reduce the amount of rinse-washing used to finish garments. And it now plans to introduce this technique for all its denim suppliers in Bangladesh - and see how it can be used in the washing process for other products.
Another big challenge is to tackle what it sees as the "complex structural issues that underlie much of our supply chain sustainability" - like the minimum wage negotiations in Bangladesh and Cambodia that led to a wave of strikes and production disruptions last year.
The retailer also points out that issues such as this require an industry-wide response, noting that by working with other buyers it was able to express its support for an increase in Bangladeshi workers' wages.
"While we appreciate this is a step into the right direction, we still request that the government creates a mechanism for automatic annual wage reviews to ensure that minimum wages develop in line with living costs," it adds.
A key theme of the retailer's sustainability strategy is embedding CSR throughout its business, and it recognises it too has a role to play in helping suppliers meet their quality, price, lead time and compliance commitments.
For instance, late changes to a product's design or poor communication with suppliers can lead to tight production lead times and, in turn, impact product quality or factory working conditions.
"Intensive capacity and pre-order planning alongside our suppliers, with clarity on volumes and lead times, can help to minimise this."
That said there is still work to be done in improving conditions in some of its supplier factories.
H&M says it conducted a total of 1,938 audits on active factories in 2010, with compliance levels rising by 4% for suppliers between their first and third head audits - up from 77% to 81%.
But in the Far East, compliance fell from 79% to 72%, although H&M says this is largely due to the small number of factories in their third audit cycle in this region. It also says there is higher transparency between H&M and its suppliers here.
The retailer also points out that issues such as discrimination or freedom of association are difficult to detect through audits, "and that although no violations could be detected, these issues require our attention."
Also requiring further progress are communication and grievance systems, overtime and its compensation, as well as chemical handling.
Nine cases of workers below the legal minimum age were followed up last year, most of which were in China. "All cases were resolved immediately," H&M says, adding that it worked with the suppliers concerned "to ensure no such employment shall happen again."
Prevention is better than a cure
Another change underway is to try to prevent non-compliance arising in the first place instead of trying to remedy instances after they have happened.
Ensuring that factories have the management systems in place is key here, and a scorecard system has been introduced that covers everything from grievance systems to health and safety, workers' rights and subcontracting.
During 2011 H&M is also launching a newly developed index-based supplier grading system - ICoC or Index Code of Conduct - which it describes as "a new and more sophisticated way of measuring our suppliers' level of compliance with our Code of Conduct."
Instead of grading suppliers and potential suppliers into five broad categories, the new quantitative index scores them on every requirement in the Code of Conduct, and will define the compliance level of a factory as a percentage based on the results of audits.
"The system provides a clearer, more accurate and ultimately comparable grading system," H&M says.
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