This is a presentation my group put together for our Strategic CSR class. We were assigned the task of recommending a Sustainability Strategy that fit within the core business strategy of our our selected business.
What's really exciting is that H&M is actually starting to do this. Not on our recommendation, of course, but as a reaction to recent press around their practice of throwing unsold clothing into the trash.
H&M’s CSR report is easy to find. Go to the website and it’s one of the 6 items on the left hand side. When you click to the report, its clear that the company is fully engaged and committed to corporate social responsibility, particularly in terms of the environment and their work conditions. The online report image (seen above) calls out some of their initiatives – NO to child labor, green is the NEW black, affordable NOT disposable, and respect for the individual. When digging a little deeper into the report, you can find specific examples of how H&M monitors supply chain relationships by having a team that makes sure standards are upheld. Additionally, in 2007 the company started using a new IT system that monitors the company’s compliance with the Codes of Conduct. With this tool, H&M can pinpoint factories and supply chain areas that are of concern and more quickly address these issues. The company acknowledges the problems that exist in the environment and talk about wanting to change them, but they do not talk about exactly how. Their sustainability vision encompasses this issue of lack of focus and clarity. It states “H&M’s business operations shall be run in a way which is economically, socially and environmentally sustainable.” This vision could be for any company and lacks the focus that would make it uniquely H&M’s. Furthermore, the report states that the company is using technologies to reduce its environmental footprint – again, something that any company could say. The report could be improved by showing exactly what they are doing and how it relates to H&M’s business strategy.
We compared H&M to their 2 main EU competitors with global presence, as well as 2 major US competitors. Patagonia was included as we consider it the gold standard in environmentally responsible mass-manufactured apparel, even though they have almost no customer overlap. The Ecos we considered in our evaluation range from indie designers reworking vintage clothes at very small scale who compete on price and style, to designers sold at Barneys, such as Rogan and Burning Torch, and Nau, whose reach was misdirected (too focused on the pacific northwest), keeping them from being a direct competitor. See appendix for more detail. http://www.hm.com/us/corporateresponsibility__responsability.nhtml http://www.company.mango.com/e/index.htm http://www.inditex.com/en/corporate_responsibility/sustainability http://sites.target.com/site/en/corporate/page.jsp?contentId=PRD03-004325 http://www.gapinc.com/public/SocialResponsibility/socialres.shtml http://www.nau.com/ http://www.patagonia.com/web/us/patagonia.go?assetid=30199#Operational
1- WHAT HAPPENS TO IN-STORE LEFTOVERS? All reports discuss the constantly changing in-store assortment to ensure a trendy presentation. But we could not find any information on what happens to the excess inventory items. Also, the products are not made from the highest quality products, this is part of how their pricing remains competitive; but inexpensive products tend to fall apart and end up in landfills more often. We see two opportunities for the remaining apparel. Option 1- donate the apparel to local Goodwill or shelters. Option 2- outdated apparel could be sold at stores like T.J. Maxx or Marshalls in their current cities at an even deeper discount. This helps keep energy costs down, but still generates revenue. 2- THE WORLD IS WATCHING. When you’re an international brand the world has more opportunity to monitor actions. Any slip, and the world will know. H&M has to be careful. 3- EMPLOYEE TURNOVER IN-STORE. Retail stores are notorious for high turnover rates. Retailers that employee younger workers have even higher turnover rates. This creates additional training time and more potential for a lack of CSR knowledge by the individuals representing H&M at a very public level. 4- AUDITING TEAM- The videos explain how H&M typically have 3 rd party auditors of European decent. We see this as a concern. Factory workers aren’t willing to tell their “real life” to people that they don’t trust. And if you don’t look like a factory worker and can’t speak the same language, they will never feel comfortable enough to be honest. Their factories in India are the only location whose Auditors were also of Indian decent. 5- FACTORY VENTILATION- The videos on the H&M website talk about harsh chemicals and show many of the factories. We see no windows for ventilation and question the worker safety. 6- EDUCATION IN THE LOCAL COMMUNITY- H&M could learn from their competitors, many of their competitors offer language lessons on Saturdays as well as technical skills to promote future opportunities. 7- CHEMICAL IRRITANTS- This refers to number 5 as well, but if workers are wearing masks in the videos, why are they not wearing gloves when dealing with chemical applicants for denim. If it’s dangerous to breathe, H&M should consider what other dangers exist. 8- CAN WORKERS EVER MOVE UP?- This refers to number 6. But if there are no educational opportunities for growth, then workers who start in a factory at 16 will still be in the same job when they are 60 as they have no skills to move up and increase their contributions. H&M could offer classes to help increase the knowledge base of their employees. 9- LIFETIME CONTRACTS- H&M employees do not have lifetime contracts. This presents an issue. Workers are constantly concerned that they may be laid off and will openly work overtime to stay in “good graces” of their bosses. They do not want to be on the “let go” list. If H&M created lifetime contracts employees would be more willing to tell manager actions that may be illegal as well as less pressure to work overtime as they would already have job security. 10- CONSTANT APPAREL CHANGEOVER CREATES EXCESSIVE WASTE- Not only is their waste that is noted in #1, but we also now have packaging waste of product shipment as well as energy wastes from constant shipping. 11- TAKING ADVANTAGE OF EMPLOYEES- refers to numbers 8 & 9. 12- RESEARCH AND DEVELOPMENT TEAM TO CONSTANTLY CHECK CHEMICAL SAFETY AND NEW CHEMICAL OPTIONS- In an ever changing world with constant chemical reports and changes being released, the R&D team must constantly search for new innovative methods for chemical sources and applications. 13- ORGANIC COTTON DISCONNECT- The video says how all cotton has been changed to organic, but this is not true. In fact, less than 10% of their cotton is organic. This is very confusing for a non-perceptive consumer. 14- ORGANIC COTTON AND SHIPPING/FACTORY CONCERNS- If organic cotton is only being produced in Turkey, shipped to India for apparel creation and then shipped to the USA for sales, what is the carbon footprint? How is this changeover to organic cotton affecting the communities that they are no longer getting cotton from? Have the fields been restored? Do the former employees have alternate occupational opportunities? 15- RECYCLED GOODS- What if H&M had leftover unsold apparel shipped back to their factories and either given to local workers for wear or refurbished into alternate garments? We see this as a huge opportunity. Competitors have partnered with car companies that were at one time shipping empty freights back to the production plants to instead ship crates of apparel to be recycled into new products. H&M should investigate this alternative.
Evaluation of H&M’s sustainability practices and reporting. The most common complaint against mass manufactured apparel designers is usually regarding labor practices at their contract factories. While H&M have not had any publicized complaints of this nature, they are often blamed for encouraging irresponsible consumerism. Their clothes are perceived as being “disposable,” a perception they attempt to address with words in their CSR report, but they do not mention what they might be doing to alleviate the impact of making such highly perishable clothing for the masses. Because H&M produces so much clothing, design for environment is not enough. While it is important for H&M to continue increasing their use of organic cotton and recycled textiles, they should also work with their textile suppliers to ensure they’re using biodegradable dyes, and try to use as little blended fabrics (ie- 50% cotton, 50% polyester) as possible, to facilitate textile recycling.
Partnership with UNICEF Contributing $1.5M over the next 3 years to fund HIV/AIDS prevention program in Cambodia, where H&M clothes are produced Funding research social consequences of cotton growing in India and other cotton producing countries Bangladesh cyclone donation - $100,000 WaterAid Monetary donation to help provide clean drinking water and effective sanitation facilities A percentage of Kylie Minogue collection sales went to WaterAid Sewing training center in Bangladesh For underprivileged youth, ages 17 and above In conjunction with UNICEF and other local organizations to eradicate child labor Clothing Donation Initiatives Make a Wish Sweden Christmas Fair Windfall Clothing
Education is a great way to improve the community and business. By offering language classes to employees, communication can be improved within the company and trust can be built. Management classes can empower employees in their home country. It can provide for a higher level work force that is native to the communities that H&M produces in. A local designer contest engages the community and provides a solution for “disposable clothing.” Anyone can submit a sample of a reworked H&M garment made with zero waste. Selected designs will be produced from similar overstock and/or returned clothing, and sold in stores near the designer. An online community might also be developed to enable selling these one-off styles to customers in different markets. Designer will be paid a commission on sales and have their label in the garment as “Designed by ___ for H&M” If a designer shows an exceptional talent (measured by sales of their styles) for reworking old styles, they might be hired for regular contributions to the collection.
Worker education- Without classes to educate factory workers they will have no chance for promotion within the workplace. Classes in another language to ease communication with designers would be helpful. Basic math and reading. Everyone deserves a chance to learn. H&M is a big enough corporation to make an impact in the retail industry. They could easily set a precedent in the industry to treat their employee’s better than average. Safety- Ensure proper ventilation and continue to research alternate energy, chemical, fabric and operating methods. Also, how long are employees sitting at a sewing machine? How ergonomic are their working conditions? Educating employee’s on safety and best practices through classes and visual reminders in the factory would be beneficial. Make breaks mandatory to help protect the well being of a workers physical state. Local development- What more can H&M do for the communities they work within? Is it building a playground for children? Is it helping teach local women how to sew? Is it showing a farmer a better irrigation system not only for the cotton we need, but also for his other crops. Big companies can make big impacts through small actions. The chart comes from our CSR class notes and further supports the need to focus on: worker education, safety and local community development.
Many retailers generate profit from their outlet stores, so H&M might want to consider this option, especially in the US where outlet shopping is very popular. Partnering with local factories that are equipped to do one-off or small lots for the recycled designs project instead of shipping the clothes all the way back to China, where factories are ill equipped to do this type of work. Many factories in New York and Los Angeles excel in just this type of sewing work. Textile recycling is a growing business, as more labels see the increasing price of oil sending prices on all petroleum-based fibers through the roof. True planetary sustainability may require a serious reduction in textile crops to make way for food (or even fuel) crops, so forward-thinking designers such as Patagonia and Nau are working with textile recycling mills to develop far superior recycled textiles. H&M shows a recycled wool coat in their current catalog, so they are already on the path. Their current partnerships are mostly strategic, especially with UNICEF in Uzbekistan. Uzbekistan is only the world’s second largest cotton exporter (behind the US, whose leadership is solely due to excessive government subsidies) because of their inhumane treatment of Uzbeki people, especially children. Every man, woman and child is forced to work the cotton fields, and because most designers do not exercise product stewardship, most have no idea if there’s Uzbeki cotton in their garments. Going directly to the root problem is a far more effective solution than the logistical and social nightmare that would ensue if they simply banned that country’s largest export. More on Uzbek cotton industry: http://www.ejfoundation.org/page142.html See slide 15 for description of the local designers contest to rework old or unpopular H&M garments.
To show product stewardship they can encourage customers to return old H&M clothing for a store credit or discount on new clothes. This gives them greater responsibility over the end of the garment’s life cycle. Their current logistics system might be able to support this, as trucks leave the stores empty. The distribution centers can then contract the sorting to an existing apparel sorting center, or implement that capability.
H&M clothing tends to go out of style or wear out more quickly than other brands, and the low prices create a perception of disposability. Only about 50% of discarded clothing is donated to charities, suggesting that the other 50% goes to landfills. H&M could not only generate goodwill, but also income, as a program of taking back consumer’s unwanted H&M garments could become another income stream. Income could come from the sale of used clothing to textile converters and from additional sales to customers who came to the store to get the discount or credit for returning old H&M clothes. The US EPA explains the status of textile recycling in the US on this website: http://www.epa.gov/osw/conserve/materials/textiles.htm “ The textile recycling industry annually prevents 2.5 billion pounds of postconsumer textile product waste from entering the solid waste stream, according to the Council for Textile Recycling. According to EPA, revenue generated by sales is enough to cover processing costs. Unsalable clothing is sold to textile recovery facilities for processing. ”
Color coding represents our perception of that company’s performance in each area. Ecos is a heading representing the growing and extremely diverse range of designers providing everything from reworked vintage to fair trade clothing.
Strategic Corporate Social Responsibility Recommendations for H&M, 2008
A CSR Strategy for Danielle Brown Jennifer Fedor Alison Kimenker Susanna Schick September 30, 2008 MBA 831 C: Strategic Corporate Social Responsibility
AGENDA <ul><li>Current Findings </li></ul><ul><ul><li>Current Corporate Strategy </li></ul></ul><ul><ul><li>CSR Strategy </li></ul></ul><ul><ul><li>Benchmarking Against Competitors </li></ul></ul><ul><ul><li>Issues, Vulnerabilities, and Opportunities </li></ul></ul><ul><li>Recommended Amendments to CSR Strategy </li></ul><ul><ul><li>Environment </li></ul></ul><ul><ul><li>Community </li></ul></ul><ul><ul><li>Workplace </li></ul></ul><ul><ul><li>Marketplace </li></ul></ul><ul><li>Conclusions and Appendicies </li></ul>2
CURRENT FINDINGS CURRENT CORPORATE STRATEGY CSR STRATEGY BENCHMARKING AGAINST COMPETITORS ISSUES, VULNERABILITIES, AND OPPORTUNITIES
THE CORPORATE STRATEGY REVOLVES AROUND TRENDS AT AFFORDABLE PRICES Current Findings Current Corporate Strategy
H&M’S STRATEGY PERMEATES EACH STAGE OF THE BUSINESS PROCESS. Current Findings Current Corporate Strategy
Current Findings Current CSR Strategy H&M HAS STRONG INITIATIVES AND INTEGRATION, BUT ITS CSR STRATEGY LACKS CLARITY. Focus on the environment: climate change and water usage Sustainable fabrics: Some organic, some recycled, responsibly sourced Supplier Ownership: managing supply chain relationships and standards Dedicated Team: CSR Manager and team to uphold CSR issues While H&M has taken great strides in incorporating CSR into their overall strategy, the company claims to take on everything and nothing – we see many great ideas but are not sure how actionable they are.
THE COMPETITION HAS MANY BEST PRACTICES THAT H&M CAN USE TO IMPROVE THEIR OWN CSR STRATEGY 1 Current Findings Benchmarking Mango is a leader for employee rights and responsibility. There are endless examples for H&M (free lunch, permanent contracts, group transportation, etc.). Target strives to make their CSR report transparent to all readers. Their viewing options make details clear & transparent. Zara’s social responsibility in manufacturing can be learned from as a majority of their products are produced internally, while at the same time they audit & educate suppliers. Old Navy wins points for their efforts to show social impact on direct labor locations (i.e., both Africa & China). Eco designers lead the industry in the use of recycled textiles. Patagonia is known worldwide for their environmental efforts & employee relations. 1: Appendix
CURRENTLY, H&M FACES MANY ISSUES, VULNERABILITIES, AND OPPORTUNITIES. Current Findings Issues, Vulnerabilities, and Opportunities H&M 2- The world is watching 1- What happens to in-store leftovers 3- Employee turnover in-store 4- Auditing Team 5- Factory Ventilation 6- Education in the local community 7- chemical irritants 8- Can workers ever move up? 9- Lifetime Contracts 10- Constant apparel changeover creates excessive waste 11- Taking advantage of employees 12- R&D team to constantly check chemical safety and new chemical options 13- Organic Cotton disconnect 14- Organic Cotton and shipping/ factory concerns 15- Recycled goods
RECOMMENDED AMENDMENTS TO CSR STRATEGY ENVIRONMENT COMMUNITY WORKPLACE MARKETPLACE
H&M HAS THE OPPORTUNITY TO PRODUCE SUSTAINABLE DISPOSABLE FASHION. Recommendations Environment 10
MANY SOLUTIONS EXIST TO THE ENVIRONMENTAL CHALLENGES FACED BY H&M. Recommendations Environment Environmental Solutions Raw materials (textiles, etc.) Demand responsibly sourced materials from all suppliers Organically grown? Choose organic as much as possible Recycled? Strictly recycled: polyester. Recycled when feasible wool, rayon, others Sustainably sourced? Wool, wood, paper, linen, rayon, etc. Certified by reputable agency? Organic, forest stewardship, etc. Dyes and treatments Demand biodegradable, natural dyes Contractors & subcontractors Reward for compliance, or going beyond compliance EMS in practice? Train employees and managers to effectively uphold EMS Employees protected? Fine contractors for safety violations Treating effluent? Fine contractors for environmental impact Energy use? Consider rewarding suppliers who use green power Logistics (DC's and Transport) Reduce energy consumption Energy use at DC's Solar? Cogeneration? Wind? Explore cost/benefit of green power Fuel efficiency and type Trucks efficient as possible? Drivers measured & rewarded re: efficiency? efficient communication Minimize redundancies and overstock, continually improve efficiency
ENVIRONMENTAL SOLUTIONS CONTINUED. Recommendations Environment Environmental Solutions Continued Stores Responsible interior design Energy use, especially Lighting Switch from halogen to LED as much as possible Building and Display Materials Sustainably sourced (already does this), low VOC, lasting (replace less often) Proximity to other destinations H&M already places their stores in high-traffic shopping destinations Customers Ask your customers: how long do they keep it? What is the average lifespan of H&M garments in various categories? How often is it washed? Do certain styles, fabrics require less maintenance? Dry clean or launder? This is a difficult dilemma, but will be easier once viable alternatives to Perc are implemented Sell, donate or dispose? Offer store credit for old H&M clothes returned to stores Corporate Offices Where the magic happens Healthy workplace Low VOC's, adequate natural light, clean HVAC Measure entire lifecycle Perform full LCA on selected typical garments from major categories, materials Measure full carbon footprint H&M seems to already be doing this, as deep as reasonably possible into supply chain Design for environment Choose recycled, organic or sustainable materials, non-blended textiles, organic dyes
H&M’S COMMUNITY INITIATIVES FOCUS ON THE COMMUNITIES WHERE ITS CLOTHING IS PRODUCED. Recommendations Community Cambodia India Bangladesh Tanzania Mozambique Madagascar Bangladesh Bangladesh Worldwide
H&M CAN OFFER MORE FOR THEIR WORKERS AND THE COMMUNITY. <ul><li>Education for employees in contractor’s factories </li></ul><ul><ul><li>Language classes </li></ul></ul><ul><ul><ul><li>Sewers can communicate with management </li></ul></ul></ul><ul><ul><ul><li>Zara currently does this with employees worldwide </li></ul></ul></ul><ul><ul><li>Management classes </li></ul></ul><ul><ul><ul><li>Sewers can manage factories in their home country – provide opportunity for upward mobility </li></ul></ul></ul><ul><li>Local designer contest </li></ul><ul><ul><li>The complaint: H&M steals from indie designers </li></ul></ul><ul><ul><li>The solution: Returned clothing is used by local designers to make new styles </li></ul></ul><ul><ul><ul><li>Contest to select designers – Make the coolest new style using only old H&M garments, with zero waste! </li></ul></ul></ul>Recommendations Community
H&M MUST FOCUS ON THE IMPORTANT WORKPLACE QUALITIES OF A SOCIALLY RESPONSIBLE COMPANY. Recommendations Workplace Source: Globescan 2005 Key Ways a Company can be seen as Socially Responsible <ul><li>Worker education </li></ul><ul><li>Safety </li></ul><ul><li>Local development </li></ul>
THE COMPANY CAN ALIGN PROGRAMS WITH ITS CURRENT STRATEGY FOR POSITIVE GROWTH. Recommendations Marketplace Customer Service Business Concept Exciting shopping experience New ideas/inspiration with every visit Unlimited options for every occasion In-Store opportunities to collect used clothing Solution for Re-distribution using existing logistics network Existing Operations Flaws Excess Stock-outs Disposable clothing has a short life No existing strategy for waste disposal
EXISTING LOGISTICS AND DISTRIBUTION SYSTEM PROVIDES OPPORTUNITY TO IMPLEMENT THESE PROGRAMS. Efficient system required for merchandise replenishment daily Recommendations Marketplace
In 2007 H&M’s product, environmental, human rights and supply chain policies were analyzed in a survey. Assessed in a group of 35 fashion companies, H&M’s social and environmental practices received the best score with 73 of a maximum 100 points. FACT: H&M has taken great strides and is recognized as a leader in CSR… but they still have room to improve and grow. Implication: Conclusion
THE BIG COMPLAINT: H&M MAKES DISPOSABLE CLOTHING. The Solution : Store credit for returns-Brings customers back! Potentially uses existing logistics to reverse-source back to… 20 Recommendations Environment