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H&M on the sustainability challenge

The Swedish fast fashion giant responds to questions from Financial Director on how its management team is thinking about sustainability.

-How has the Board made sustainability and climate change core to the group’s future?

The concept of “Fashion for everyone, at a great price”, has remained with our company for more than 70 years. In the same way that we took the lead 70 years ago by making fashion accessible to all, we now want to take the lead in ensuring a more sustainable fashion industry by tackling some of the most significant challenges that are facing our planet and society.

-How is this reflected in the strategy and business model?

Our sustainability work is embedded in our culture and our values and must be considered as an integral part of our overall business strategy.

-How is this reflected in financial and non-financial reporting?

All functions within H&M Group are assessed on the basis of sustainability objectives, which are just as important as any other benchmark.

-Is there integrated thinking to support integrated reporting?

We have a broad set of sustainability related KPIs which we follow internally (measuring impacts and performance of our strategies and their implementation, reporting regularly to our CEO as well as the Board) and that we account for publicly towards a diverse range of different stakeholders. We try to cater to the different needs of all these different stakeholders – by having integrated relevant KPIs and management systems in our financial reporting, by producing a frequently awarded separate sustainability report that goes into greater depth as well as an accompanying sustainability website hosting policies and further information.

-Are there metrics and KPIs to support this at all levels of H&M?

Our board of directors reviews a set of metrics every six months, our CEO and CFO every three months. We publish these and more metrics annually. Additionally, we have the 4C scorecard – a set of KPIs consisting of four pillars, whereof sustainability is one. This is used to measure performance within our different business units and brands and is as such also used as a tool for performance review for concerned executives.

-How detailed is supply chain due diligence?

We are working with our suppliers to achieve our ambition that everyone in our supply chain has access to a fair job. Back in 1998, we started an assessment programme to help monitor

working conditions in supply chain factories, which has led to improvements ever since. Our assessment programme provides us with a solid foundation for our work and is an integral part of our company risk and human rights due diligence framework. The programme ensures that our

requirements are met, drives continuous improvement and informs our core social sustainability strategy.

-What organisations have been consulted on this?

We have had, and continue to have, a close dialogue with a variety of external experts, unions and international organisations when it comes to our sustainability strategy.

-Does the group avoid the term ‘fast fashion’ because it raises questions of disposable consumerism?

Fast fashion can be understood in different ways: as being agile in adapting business to customers’ demands, which H&M Group is; or as encouraging an over-consumption attitude, which H&M Group is not.

We are not the only global player in this industry and – with or without us – we foresee that fashion as a consumption phenomenon will continue existing in the future as the global population grows.

To us, the key is to do it in a sustainable, inclusive and affordable way. But the fact of offering affordable design in a democratic way doesn’t mean that we want our customers to have a throw-away mindset. Instead, we want our customers turn to us for design they love and they will care for a long time.

 -In order to meet the expectation of being environmentally and socially friendly how is H&M changing its business model?

Our planet provides us with an abundance of natural resources. However, with global demand rapidly outstripping supply, the fashion industry cannot continue to operate as it has in the past. At H&M Group, we believe that an industry-wide shift from a linear to a circular business model is the only solution. In a circular model, resources stay in use for as long as possible before being regenerated into new products and materials, resulting in a reduction in waste and negative impacts.

As a part of our sustainability strategy, we have set some ambitious and bold goals. E.g. our goal to only use recycled or other sustainably sourced materials by 2030 and our goal to achieve a climate positive value chain – a value chain that creates a net positive impact on the climate by 2040.

-How will the necessary adjustments impact margins?

At H&M Group, we’ve always believed that great design should, and can, be available to anyone. We want to make it possible for everyone to look and feel good. This is why we continuously invest in the customer offering to find the sweet spot of fashion, quality, price and sustainability. We have been investing in sustainability for the past 20 years and it has for sure impacted margins, but we also see positive effects starting to come through. Most important in terms of environmental impact, but also in terms of customers asking for and appreciating our offering, cost savings and positive articles in media.

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