VA
Insights

In recent years, sophisticated business and thought leaders have come to reconnect company success with social progress. An overall framework came into place in 2011 when Michael Porter and Mark Kramer raised the concept “shared value” in Harvard Business Review. It refers to the practices and policies that enhance the competitiveness of a company while advancing economic and social conditions in the communities in which it operates.

In the fashion industry, labor rights and resource use are two prevailing challenges. H&M, a global brand with 872 suppliers making its products in 1,946 factories, creating 1.6 million jobs, understands how it creates economic value by creating societal value. Their recipe is to engage stakeholders in making the change happen.

Employee

H&M believes that only when employees understand what the company is doing and share the same vision, can impact be sustained. In partnership with WWF, 2,300 hours of training have been delivered to employees on the importance of water and opportunities that the industry has in making a significant contribution to tackle today’s water challenge.

Supply Chain

H&M seeks to use its influence to promote better working conditions and environmental consciousness throughout the supply chain. H&M sets high standards for its supplier and regularly monitors their performance. Responsible partners who share the same values and who are willing to work transparently to improve their social and environmental performance are rewarded with better business, i.e., long-term and strategic partnerships with H&M.

As a result, there is greater stability and reliability in H&M’s sourcing. One the one hand, a more sustainable supply chain has been formed – the 162 strategic partners are now making round 60% of H&M’s products. On the other hand, factories have reported lower worker turnover.

Business Peers

In collaboration with business peers, NGOs, academia and others in the Sustainable Apparel Coalition, H&M is helping to set industry standard for measuring the sustainability of apparel and footwear products, known as the Higg Index. Later this index will be translated into a product labeling system, allowing customers to benchmark products across brands. This move is likely to improve the sustainability performance of the entire fashion industry.

Community

Learning that many clothes end up in landfills resulting in grievous waste, H&M started the “close the loop on the textile fibers” program. The program collects useless clothes with any brand from the customers, rewards them with discount on new purchases, and makes new products (the so-called closed-loop products) from recycled fibers. The first closed-loop products were launched in 2013, made with 20% recycled material from collected garments. That percentage can be increased with innovation.

Government

One company alone cannot make systemic change. To protect labor rights, H&M has been actively engaging governments to increase minimum wages. Regarding environmental protection, H&M is developing dedicated water engagement plans for the Yangtze (China) and Brahmaputra (Bangladesh) river basins. The plan involves work with provincial government to advocate for setting up new natural reserves.

Admittedly, our recognition of the transformative power of shared value is still in its genesis. But companies like H&M have given us more confidence than ever that “businesses acting as businesses, not a as charitable donors, are the most powerful force for addressing the pressing issues we face”.