{"id":10176,"date":"2016-11-04T15:00:07","date_gmt":"2016-11-04T19:00:07","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/has-hm-delivered-sustainable-fast-fashion\/"},"modified":"2016-11-04T15:00:07","modified_gmt":"2016-11-04T19:00:07","slug":"how-is-hm-delivering-sustainable-fast-fashion","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-is-hm-delivering-sustainable-fast-fashion\/","title":{"rendered":"How is H&M delivering sustainable fast fashion?"},"content":{"rendered":"

With the EU finally ratifying the COP21 Climate Agreement[1]<\/a> last month and the agreement taking effect today, it is now inevitable that highly visible companies such as H&M will be targeted by their respective governments. H&M is the second largest apparel retailer in the world, achieving $21.73B sales in 2015. The iconic fast fashion giant interestingly both contributes to and is impacted by climate change. Importantly, H&M\u2019s active approach puts it in a seemingly oxymoronic state \u2013 a sustainable fast fashion retailer.<\/p>\n

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Apparel accounts for 10% of global carbon emissions[2]<\/a> – the manufacturing process leaves a significant carbon footprint, requiring significant electricity and water usage.[3]<\/a> At the end of the supply chain, fast fashion giants, such as Inditex and Forever 21, also facilitate consumer waste through the affordability and temporary nature of their products.<\/p>\n

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As H&M\u2019s business model is seen to be a key contributor to climate change, the company has suffered reputational attacks.[4]<\/a> While some may argue that such negative press will not deter H&M\u2019s core target market, say the average cash-strapped student from buying its products, climate change also affects the sustainability of H&M\u2019s business financials. The main challenges H&M are facing:<\/p>\n

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Reputational and regulatory risk<\/strong>. Fashion is an emotional industry and aside from H&M\u2019s efficient supply chain, it relies heavily on both its image and brand equity. As such, H&M is particularly sensitive to negative PR[5]<\/a> conducted by NGOs and regulators. H&M\u2019s approach to date has been proactive and all-embracing, rolling out multiple initiatives that have put sustainability in the forefront of their consumers\u2019 minds. In fact, H&M has used its focus on sustainability as a market differentiator from its peers such as Inditex.<\/p>\n

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Supply chain disruptions. <\/strong>Extreme weather conditions as a result of human-induced climate change affects parts of H&M\u2019s complex supply chain. In recent years, many of the largest suppliers of cotton such as Brazil, have experienced droughts[6]<\/a>, escalating input prices and forcing H&M to rethink their product assortment and balance the geographic balance of their supply chain. Disruptions in any part of H&M\u2019s suppliers will have ripple effects in its ability to main its supply chain efficiencies.<\/p>\n

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Product cycle changes. <\/strong>With increases of 3.7 to 7.8Celsius in average surface temperatures[7]<\/a>, climate change can dramatically disrupt the product assortment and planning of seasonal inventory. For example, there is less need for a winter assortment and the full-price selling period for the season is now significantly tighter. Following the heavy investment by companies such as Amazon in injecting machine learning into demand forecasting, H&M needs to incorporate these environmental factors into their operational decisions[8]<\/a><\/p>\n

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H&M has been a pioneer in their sustainability initiatives,[9]<\/a> but as the market leader, could take on a more radical approach and lead their counterparts in more revolutionary rules. H&M has made considerable changes to their people, processes and products to address these risks.<\/p>\n