Group Sustainability Report 2018

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Sustainability Report 2018 OVERVIEW OVERVIEW

Table of contents VISION & STRATEGY 100% LEADING THE CHANGE

1. OVERVIEW 3 5. 100% FAIR & EQUAL 60 Letter from CEO 4 Key facts & figures 2018 61 Executive summary 6 KPIs and goals 62 Key Achievements 2018 7 100% Fair & Equal explained 63 Awards & recognitions 9 Fair jobs for all 64 About H&M Group 10 Enabling well-functioning industrial relations 66

Our value chain 11 Supporting a fair living wage 69 & RENEWABLE CIRCULAR 100% 2. VISION & STRATEGY 12 Addressing human rights issues 80 Our vision & strategy 13 Inclusion & diversity 83 Our ambitions 14 6. STANDARDS & POLICIES 88 Our Change-Making Programme 15 Key facts & figures 2018 89 How we are organised 16 Standards & policies explained 90 Engaging our changemakers 17 Working with standards & policies 91 Interview with Head of Sustainability 18 Our human rights policy 92

3. 100% LEADING THE CHANGE 19 Our salient human rights issues 93 & EQUAL FAIR 100% Key facts & figures 2018 20 Policies within our own operations 94 100% Leading the Change explained 21 Policies for our business partners 95 Innovation 22 Products & materials policies 98 Transparency 25 7. HOW WE REPORT 99 Rewarding sustainable actions 29 How we report 100 STANDARDS & POLICIES 4. 100% CIRCULAR & RENEWABLE 30 Materiality matrix 103 Key facts & figures 2018 31 UN’s Sustainable Development Goals 104 KPIs and goals 32 Key collaborations 105 100% Circular & Renewable explained 33 Auditor’s report 106 Becoming climate positive 53 Get in touch 108 HOW WE REPORT WE HOW

ARKET.

H&M GROUP SUSTAINABILITY REPORT 2018 2 OF 109 OVERVIEW OVERVIEW VISION & STRATEGY 100% LEADING THE CHANGE 100% CIRCULAR & RENEWABLE CIRCULAR 100% OVERVIEW 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW

H&M.

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

Letter from CEO VISION & STRATEGY 100% LEADING THE CHANGE

A little more than 70 years ago, my challenges. We know that we are a large grandfather opened a shop selling wom- company and we therefore know that we

en’s apparel in the small Swedish town have an equally large responsibility to & RENEWABLE CIRCULAR 100% of Västerås. He believed that everyone ensure that we have a positive impact on should have the opportunity to express our planet. their personality through fashion and he saw it as his mission to democratise As such I am proud to say that our fashion and make it available to all sustainability work is embedded in our rather than the privileged few. The con- culture and our values. A long-term cept of “Fashion for everyone, at a great approach is a natural and important price” has remained with our company part of our overall business strategy. We ever since. also believe that taking a long-term view 100% FAIR & EQUAL FAIR 100% is crucial when it comes to dealing with In the same way that we took the lead 70 complex sustainability issues. years ago by making fashion accessible According to the UN, climate change to all, we now want to take the lead in and poverty are two of the most signi ensuring a more sustainable fashion ficant challenges of our time and will industry by tackling some of the most affect many generations to come. While

significant challenges that are facing our I have a great deal of respect for the vast STANDARDS & POLICIES planet and society. complexity of both of these challenges, I also strongly believe that we can make We are part of an industry which a positive contribution towards facing undoubtedly faces significant chal- them. We will continue to take a long- lenges when it comes to environmental term approach to achieve sustainable and social sustainability – but I want production, while at the same time cre- H&M group to continue to be a positive ating good jobs and driving prosperity force towards resolving these shared in the markets in which we operate. REPORT WE HOW

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN VISION & STRATEGY

In order for our company to take on innovation that is required to create a energy, transport and resources. We are environmentally hazardous system to these challenges in an effective way circular fashion industry. switching to renewable electricity and a circular one that ensures long-term

I believe that sustainability must be streamlining our use of energy. With environmental and social sustain- 100% LEADING THE CHANGE considered as an integral part of our Encouragement of and collaboration the help of innovation, we are not only ability. Big leaps towards new and business rather than being treated as with other forces for positive change able to find new sustainable materials greener solutions, are usually taken an after-thought. For this reason, we is especially important when it comes and recover textile fibres in a better by companies and countries that are work to ensure that sustainability is to the complex challenges faced by the way than before, but we can also make developing and can therefore invest integrated into all aspects of our busi- fashion industry, and indeed all other this scalable in the long term. I am in technological innovations. As such ness – it should pervade everything industries. Just a few examples of our impressed every year by the winners of consumption that contributes to both that we do, all the decisions we make collaborations include: our work with the Global Change Award challenge for reducing global poverty and enabling and the everyday work of all our WWF on the responsible use of water innovation, which was founded by H&M investment in modern, sustainable

employees. in our value chain, our investment in Foundation – it presents solid proof that production is not the problem, but & RENEWABLE CIRCULAR 100% innovations companies that are devel- a circular fashion industry is possible. instead part of the solution. Taking this approach makes it possible oping technologies for textile recy- The transformation of orange peel and for all of us to work towards the same cling, and our close partnership with algae into fabric and grape residue into This report is our opportunity to share goal. For this reason, all functions the Ellen MacArthur Foundation that plant-based leather, are just a few of an honest and transparent account of within H&M group are assessed on is helping drive the development of a the great ideas that have been realised. the positive steps that we have taken the basis of sustainability objectives, circular economy as well as our work I’m convinced that technical innova- so far as well as the complex challenges which are just as important as any with the UN and textile workers’ global tions will be the solution to many of the we continue to face. It helps us under- other benchmark. trade union who are advising us about environmental challenges the textile stand both the areas in which we have the best way to tackle the huge issue of industry is facing and will contribute to made progress, and those that we need 100% FAIR & EQUAL FAIR 100% However, it is not possible to achieve wages in the textile industry. a more sustainable consumption. to re-think and further develop. While great change in isolation. We have I am proud of our achievements, I am over 70 years of experience, but we are The values of H&M group also include The reality is that as our population aware that there is still a lot more for entirely dependent on our partnerships a constant willingness to innovate grows, so does also consumption, us to do. However, I remain convinced with experts from other fields to really and look at things in new ways. Today, which already today goes beyond what that our long-term approach coupled drive our sustainability work forward. we are using AI to make it easier for the planet can afford. The key to our with our genuine determination, will

We therefore fully support the develop us to ensure a good match between future is therefore to ensure that we help us lead the way to creating a more STANDARDS & POLICIES ment of the new technology and production and demand, thus saving move away from an old, linear and sustainable fashion industry. HOW WE REPORT WE HOW Karl-Johan Persson, H&M Group

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

Executive summary VISION & STRATEGY 100% LEADING THE CHANGE

From the beginning, H&M group’s role has been to democratise fashion. Today, that means making it sustainable: Our vision and it’s the only way we’ll keep strategy are built on making great fashion and de- three key ambitions & RENEWABLE CIRCULAR 100% sign available today, tomorrow and for generations to come.

Our sustainability vision is to use our size and scale for good, 100% LEADING and with the help of techno THE CHANGE logy and innovation, lead the & EQUAL FAIR 100% change towards circular and renewable fashion while being a fair and equal company. To achieve this, we have developed STANDARDS & POLICIES an ambitious strategy with the 100% CIRCULAR 100% FAIR help of a broad range of exter- & RENEWABLE & EQUAL nal and internal experts. Our strategy follows a science-based approach, wherever possible. HOW WE REPORT WE HOW

H&M.

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

Key achievements 2018 VISION & STRATEGY 100% LEADING THE CHANGE

THE TAKE CARE CONCEPT LAUNCHED IN FURTHER FOUR MARKETS, OFFERING CUSTOMERS H&M Group has GUIDANCE AND HANDS-ON SUPPORT IN HOW TO CARE FOR THEIR GARMENTS. developed 2030 GHG emissions reduction

goals that have been & RENEWABLE CIRCULAR 100%

WE HAVE ACCELERATED OUR approved by the WORK WITH ARTIFICIAL INTELLIGENCE Science Based BY CREATING AN AI DEPARTMENT WITHIN H&M GROUP. THIS WILL Targets initiative. FURTHER HELP US MAKE THE BEST AND MOST SUSTAINABLE BUSINESS DECISIONS POSSIBLE. 655 factories and 930,000 garment workers are covered 100% FAIR & EQUAL FAIR 100% DURING 2019, H&M AND H&M HOME ARE by one or both of our key 57% of all materials ROLLING OUT A NEW TRANSPARENCY programmes for workplace TOOL IN THEIR ONLINE STORES, we use to make our ENABLING CUSTOMERS TO TRACE MOST dialogue and Wage products are recycled OF THEIR PRODUCTS TO THE FACTORY THEY HAVE BEEN MADE IN, AND FIND Management Systems. or other sustainably FURTHER INFORMATION TO MAKE MORE

This represents 84% of STANDARDS & POLICIES sourced materials. CONSCIOUS CHOICES. our product volume.

Because investing in innovation H&M GROUP WAS RANKED AMONGST unlocks circularity, we support companies TOP 5 IN FASHION REVOLUTION’S 2018 INDEX WITH A SCORE OF 55%

such as Moral Fiber and Colorifix. (HIGHEST SCORE 58%). REPORT WE HOW

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

Key achievements 2018 VISION & STRATEGY 100% LEADING THE CHANGE

We launched Afound, a brand with the mission of giving unsold

products a new life. & RENEWABLE CIRCULAR 100% 95% of cotton used by We have developed H&M Group is recycled a new Water Roadmap for or other sustainably our supply chain which We’ve reduced CO sourced. 2 contains our key goals and emissions from our actions up until 2022. own operations by a further 11%. This takes & EQUAL FAIR 100% We set a new circular us another step closer H&M Group has been included in packaging strategy and to achieving a climate the Dow Jones Sustainability Index roadmap for the entire positive value chain for several years now, this year value chain. by 2040. reaching the highest possible score STANDARDS & POLICIES in the categories of Quality & Recall Management, Social Reporting,

WE COLLECTED 20,649 TONNES OF TEXTILES FOR REUSE AND RECYCLING Environmental Reporting and the THROUGH OUR GARMENT COLLECTING INITIATIVE. THAT’S 16% MORE THAN LAST best industry score in Supply Chain YEAR AND REPRESENTS THE EQUIVALENT OF 103 MILLION T-SHIRTS.

Management. REPORT WE HOW

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

Awards & recognitions VISION & STRATEGY 100% LEADING THE CHANGE

Here are some of the awards and recognitions that H&M Group has received during 2018:

DOW JONES SUSTAINABILITY recognized by the Ethisphere® Institute as WORLD INDEX one of the World’s Most Ethical Companies. H&M Group has been included in the Dow

Jones Sustainability Index for several years NEWSWEEK GREEN RANKING & RENEWABLE CIRCULAR 100% now, this year reaching the highest possible H&M group was ranked number 11 in the score in the categories of Quality & Recall Newsweek Green Ranking among the 500 Management, Social Reporting, Environmen- most sustainable companies in the world tal Reporting and the best industry score in for 2017 (2016: 63, 2015: 88, 2014: 95). The Supply chain Management. ranking is annually produced by the maga- zine Newsweek in collaboration with lead- FASHION REVOLUTION’S FASHION ing environmental research organisations. TRANSPARENCY INDEX H&M group was ranked amongst the top 5 in TEXTILE EXCHANGE PREFERRED 100% FAIR & EQUAL FAIR 100% Fashion Revolution’s Fashion Transparency FIBER & MATERIALS REPORT 2018 Index with a score of 55% (highest score 58%). According to the Textile Exchange’s Preferred Fiber & Materials Market Report FTSE4GOOD 2018, H&M group was the biggest user of H&M group has been independently preferred Man-made cellulosic fibres and assessed according to the FTSE4Good the biggest user of Lyocell, as well as pre- criteria and has satisfied requirements to ferred cotton, and the second biggest user STANDARDS & POLICIES become a constituent of the FTSE4Good of recycled and organic cotton. Index Series. Companies in the FTSE4Good Index Series have met stringent social and DRAPERS SUSTAINABILITY AWARD UK environmental criteria and are positioned For third year in a row, H&M group has to capitalize on the benefits of responsible been recognised by the British retail pub- business practice. lication Drapers for their contribution to the retail industry. In the Annual Awards HOW WE REPORT WE HOW ETHISPHERE® INSTITUTE Ceremony, H&M group won the Sustaina- H&M group UK team accepting the Drapers For the eight time, H&M group has been bility Award of The Year. Sustainability Award from host Russell Kane.

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

About H&M Group VISION & STRATEGY 100% LEADING THE CHANGE

Since day one, our business has ware – as well as healthy, modern 2018 FIGURES been about bringing fashion and food in selected stores. design to all people. Today, this is reflected in all our brands. We We reach customers around the 4,968 stores in are always working to create the world through our integrated best offering for our customers, in physical stores and digital 71 markets and the most sustainable way. channels. Our customer proxim- e-commerce in 47 markets. ity is amplified by our 177,000 & RENEWABLE CIRCULAR 100% H&M group includes nine brands, colleagues globally, operating each with their own specific in both sales and production brand DNA – H&M, COS, Week- markets. day, Cheap Monday*, Monki, H&M billion *As previously communicated, Cheap Monday will 210 Home, & Other Stories, ARKET be ending operations in 2019. The H&M group’s transition work in response to the extensive and Afound. Together, our changes within the fashion industry means that the Swedish kronor in net sales. company is prioritising and focusing on its core brands offer customers a wealth business. Cheap Monday’s business model is based on traditional wholesale, which is a model that of styles and trends in fashion, has faced major challenges due to the shift in the industry. The H&M group has therefore decided to beauty, accessories and home- close Cheap Monday. Our products are made in & EQUAL FAIR 100%

ABOUT H&M FOUNDATION 2,383 supplier H&M Foundation is a non-profit global foundation, with a mission to factories around the world. act as a catalyst for positive change and improve living conditions by investing in people, communities and innovative ideas. The foun-

dation is privately funded by the Stefan Persson family, founders STANDARDS & POLICIES and main owners of the H&M group. Since 2013, the Stefan Persson H&M alone has nearly family has donated 1.5 billion Swedish Krona ($200 million/€163 million) to the H&M Foundation. Learn more about the foundation’s work on pages 24, 38 and 87, and read H&M Foundation’s annual 800 report, A Catalyst for Change 2018. million customer Monki. transactions per year. HOW WE REPORT WE HOW

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LETTER FROM CEO / EXECUTIVE SUMMARY / KEY ACHIEVEMENTS 2018 / AWARDS & RECOGNITIONS / ABOUT H&M GROUP / OUR VALUE CHAIN

Our value chain VISION & STRATEGY

Check out where in the world the different stages of our value chain take place on an interactive world map here. 100% LEADING THE CHANGE

Our vision is to lead the change towards a circular and renewable fashion industry, while being a fair DESIGN and equal company. To do this, it is our responsibility to ensure our value chain works to its High 0% 0% Low full potential. Our value chain describes the full O U R CLIMATE WATER SOCIAL INFLUENCE I M PACT * I M PACT * IMPACT** sequence of processes involved in the production and lifespan of all our products, from product idea- RAW MATERIALS

tion to customer use and disposal. Medium & RENEWABLE CIRCULAR 100% USE DESIGN 9% 87% High

O U R CLIMATE WATER SOCIAL But our value chain does not operate in isolation. INFLUENCE I M PACT * I M PACT * IMPACT** With nine brands selling products in over 4,968 FABRIC AND YARN PRODUCTION stores and online markets in 47 countries, it is connected to countless people, communities, eco Medium 46% 6% High systems and other businesses around the world. O U R CLIMATE WATER SOCIAL H&M Group INFLUENCE I M PACT * I M PACT * IMPACT** SALES RAW MATERIALS IMPACTS ALONG OUR VALUE CHAIN value chain PRODUCT MANUFACTURING

Our vast network of value chain connections Medium 18% 1% High 100% FAIR & EQUAL FAIR 100% means that our social, environmental and eco- O U R CLIMATE WATER SOCIAL nomic impacts are significant and far-reaching. INFLUENCE I M PACT * I M PACT * IMPACT** To maintain our business idea, we need to TRANSPORT maximise our positive impacts and minimise Medium 2% 0% Low our negative impacts throughout our value chain FABRIC AND YARN and along every customer’s journey with us. O U R CLIMATE WATER SOCIAL TRANSPORT PRODUCTION INFLUENCE I M PACT * I M PACT * IMPACT** STANDARDS & POLICIES SALES To make this happen, we use our size and scale PRODUCT to drive change and innovation in all parts of MANUFACTURING High 0% 0% High the value chain, from raw materials to customer O U R CLIMATE WATER SOCIAL experience. INFLUENCE I M PACT * I M PACT * IMPACT** USE

Please see the illustrations to the right for a more *Climate impacts are based on a scope 3 assessment made by Ecofys in 2017, based on 2016 data. Deviation from 100% is due to omission of other emission sources not fitting the format of this illustration, the major one being the scope 3 category Low 21% 8% Medium in-depth look at the impacts we have along our purchased products (other expenditures). The water footprint is based on the Water Footprint Network’s methodology and HOW WE REPORT WE HOW includes green, blue and grey water footprints. Deviation from 100% is due to rounding effects. O U R CLIMATE WATER SOCIAL value chain. Please also visit sustainability.hm.com **For more information about our social impacts, see page 93. A number of these issues related also to H&M group’s salient INFLUENCE I M PACT * I M PACT * IMPACT** for further information. human rights issues, i.e. those human rights at risk of the most severe impact across our operations and supply chain.

H&M GROUP SUSTAINABILITY REPORT 2018 11 OF 109 OVERVIEW VISION & STRATEGY VISION VISION & STRATEGY 100% LEADING THE CHANGE

VISION & & RENEWABLE CIRCULAR 100% STRATEGY 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW

H&M.

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OUR VISION & STRATEGY / OUR AMBITIONS / OUR CHANGE-MAKING PROGRAMME / HOW WE ARE ORGANISED / ENGAGING OUR CHANGEMAKERS / INTERVIEW WITH HEAD OF SUSTAINABILITY

Our vision & strategy & STRATEGY VISION VISION & STRATEGY 100% LEADING THE CHANGE

At H&M group, we’ve always believed that great design should – Our sustainability strategy and can – be available to anyone. From the beginning, our role has been to democratise fashion. Today, that means making it VISION sustainable: it’s the only way we’ll keep making great fashion and Our vision is to lead the change towards circular and renewable fashion design available to many people, for many years to come. while being a fair and equal company.

Our vision is to lead the change towards This vision is not only necessary from & RENEWABLE CIRCULAR 100% a circular and renewable fashion indus- a social and environmental perspec- try, while being a fair and equal com- tive, it also makes good business sense. pany. Using our size and scale, we are Long-term investments in sustainabil- working to catalyse systemic changes ity provide us with long-term business across our own operations, our entire opportunities that will keep H&M 100% LEADING THE CHANGE value chain and the wider industry. In group relevant and successful in our 100% CIRCULAR & RENEWABLE 100% FAIR & EQUAL this way, we can continue to engage our rapidly changing world. customers and provide great fashion

and design choices – today, and into the We know that achieving our vision & EQUAL FAIR 100% CHANGE-MAKING PROGRAMME future. will not be easy, but our openness to Our Change-Making Programme is at the heart of all our sustainability work. It includes tackling challenges keeps us alert goals, roadmaps, standards and methods that help us work towards our vision, enable Our vision and strategy applies to all to opportunity. We are strongly posi- changemakers and ensure that sustainability is integrated in everything we do. our brands, while allowing each of them tioned to make a positive impact, in to maintain their own brand identity. part because of our continuing partnership with stakeholders and industry ENGAGING CHANGEMAKERS STANDARDS & POLICIES While our business has a long and well- experts who help set and shape our established history in sustainability, sustainability work. Furthermore, by projected population growth figures applying a science-based approach to and natural resource levels make it our work, we can set the best goals and clear that a more focused approach to roadmaps possible to drive positive sustainable fashion is needed. Our role, change throughout our company and ALL COLLEAGUES ALL PARTNERS as leaders in our industry, is to inno- the wider industry.

vate, influence, collaborate, and lead REPORT WE HOW ALL CUSTOMERS the way towards a truly sustainable fashion future.

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OUR VISION & STRATEGY / OUR AMBITIONS / OUR CHANGE-MAKING PROGRAMME / HOW WE ARE ORGANISED / ENGAGING OUR CHANGEMAKERS / INTERVIEW WITH HEAD OF SUSTAINABILITY

Our ambitions & STRATEGY VISION VISION & STRATEGY 100% LEADING THE CHANGE

Our vision and strategy are built on three key ambitions

100% LEADING THE CHANGE To find and implement solutions to the • Promote and scale innovation scale and breadth of the challenges • Drive transparency facing our industry, we must be clear, • Reward sustainable actions bold and visionary. Our three ambitions give us the long-term focus, direction

100% CIRCULAR & RENEWABLE and motivation we need to truly drive & RENEWABLE CIRCULAR 100% • A circular approach to how positive change through our company products are made and used and across our industry. • Use only recycled or other sustainably sourced materials 100% LEADING • A climate positive value chain THE CHANGE

100% FAIR & EQUAL • Fair jobs for all • Inclusion and diversity 100% FAIR & EQUAL FAIR 100%

100% CIRCULAR 100% FAIR Big change requires bold actions and the courage to & RENEWABLE & EQUAL “aim high. At the same time, we have to be humble STANDARDS & POLICIES to the challenges our planet is facing. So if we want to make a real change, we have to be brave, push the boundaries and not be afraid to fail.”

REPORT WE HOW ANNA GEDDA, HEAD OF SUSTAINABILITY, H&M GROUP

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OUR VISION & STRATEGY / OUR AMBITIONS / OUR CHANGE-MAKING PROGRAMME / HOW WE ARE ORGANISED / ENGAGING OUR CHANGEMAKERS / INTERVIEW WITH HEAD OF SUSTAINABILITY

Our Change-Making Programme & STRATEGY VISION VISION & STRATEGY 100% LEADING THE CHANGE

By steering and integrating sustainability across our business, our Change-Making We turn our vision and strategy into action by working with: Programme turns our strategy into action and drives long-lasting change.

H&M group is comprised of multiple brands, which operate in a variety of functions across many different & RENEWABLE CIRCULAR 100% countries and cultures. Similarly, our value chain is vast and complex. Along with the obvious opportunity GOALS ROADMAPS STANDARDS METHODS AND AND POLICIES FOLLOW-UP this scale offers, it also presents a big challenge: how Our vision and These are strategic do we drive systematic and effective long-term change ambitions are trans- plans, targets and Our sustainability These are the lated into concrete actions for reaching standards ensure that processes, routines across both our business and value chain? goals at group, market our goals. we and our business and methods we use and function levels. partners operate in to set goals and HOW WE INTEGRATE SUSTAINABILITY We have roadmaps a sustainable way. evaluate our progress. Sustainability is integrated as one of four equally Each function and for specific important parameters in our company performance market has ownership sustainability areas, for They include our They ensure that of its own example energy, water, Code of Ethics, our strategy is well- & EQUAL FAIR 100% score card. This means that each central function sustainability goals. innovation, waste and Sustainability integrated across and brand is measured on a set of sustainability transparency. Commitment, Human our business. KPI’s, alongside and in equal weight to sales figures, Rights Policy, etc. customer satisfaction, etc. In addition to that, our Change-Making Programme brings together the See more on page 88. goals, roadmaps, standards and follow-up methods we need to work towards our vision, while also STANDARDS & POLICIES leaving room for locally tailored implementation and activities. This enables our brands and functions to take ownership and integrate our sustainability strategy across the business, setting its own measurable sustainability goals and activities. Within CULTURE AND VALUES each sales market, we employ a dedicated sustainability manager who drives the implementation of HOW WE REPORT WE HOW our strategy from a local perspective to engage all colleagues and customers.

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How we are organised & STRATEGY VISION VISION & STRATEGY 100% LEADING THE CHANGE

We want to make sure all our efforts our business partners to assess their keep working together, even as our performance against our Sustaina- vision, ambitions and strategy grow bility Commitment and support them Organisational chart and change. This year we strength- in making improvements through ened our sustainability steering by capacity-building programmes and establishing a senior cross-functional activities. Read more about our Sus- BOARD OF DIRECTORS forum, which reviews strategy perfor- tainability Commitment on page 95.

mance and defines key priorities. & RENEWABLE CIRCULAR 100%

Reporting directly to our CEO, our Head of Sustainability is responsi- Bi-annual ble for the implementation of our performance sustainability vision and strategy reporting together with the Executive Manage- CEO ment Team. Twice a year, Head of Sustainability reports performance (against key sustainability indicators) 100% FAIR & EQUAL FAIR 100% to our Board of Directors. GROUP FUNCTIONS, Our global sustainability department HEAD OF BRANDS, RETAIL AND consists of more than 30 experts SUSTAINABILITY PRODUCTION responsible for setting strategies, COUNTRIES targets, goals, policies and follow-up Cross-functional procedures to ensure that our forum reviewing STANDARDS & POLICIES sustainability work is carried out strategy performance and defining priorities systematically. based on business intelligence and inno- Every retail market and H&M group vation process LOCAL AND function has sustainability managers. GLOBAL FUNCTION-SPECIFIC In our 20 production markets, we SUSTAINABILITY SUSTAINABILITY DEPARTMENT MANAGERS AND employ more than 150 people work- TEAMS ing specifically with sustainability. REPORT WE HOW These colleagues work directly with ARKET.

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Engaging our changemakers & STRATEGY VISION VISION & STRATEGY 100% LEADING THE CHANGE

Changemakers are the people who help H&M group achieve our vision of a sustainable fashion and design industry. Through effective collaboration we can accelerate impact to drive long-lasting change.

STAKEHOLDERS & EXPERTS OUR CUSTOMERS Building and maintaining partner- Our size and scale means we have & RENEWABLE CIRCULAR 100% ships and dialogue with industry many customers, so every single stakeholders and experts is crucial to action, no matter how small, makes a achieving our vision. Not only do they huge collective difference. That is why give us direction and expertise for it is so important that we inspire and our long-term goals and action plans, enable our customers to make sus- they also work with us to find the best tainable choices for the environment, solutions and address specific chal- people and communities. One exam- lenges. ple of how we engage with customers

is the garment collecting initiative & EQUAL FAIR 100% BUSINESS PARTNERS that we have across our group. Read We always aim to build long-term more on page 29. rewarding relationships with our business partners. By becoming part- To read further on how we engage ners, we can work together to raise with our stakeholders, please visit environmental and social standards sustainability.hm.com. H&M. across our industry. STANDARDS & POLICIES

OUR COLLEAGUES Engaging with our many and diverse stakeholders gives Everyone at H&M group should feel “ they can contribute to our sustaina- us new perspectives and helps us build partnerships for bility vision and goals. By enabling solutions that we could not achieve on our own. our employees to use their unique talents, skills and passions in their ” HENDRIK ALPEN, REPORT WE HOW daily work, our business can lead the SUSTAINABILITY ENGAGEMENT change our industry needs. MANAGER, H&M GROUP

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OUR VISION & STRATEGY / OUR AMBITIONS / OUR CHANGE-MAKING PROGRAMME / HOW WE ARE ORGANISED / ENGAGING OUR CHANGEMAKERS / INTERVIEW WITH HEAD OF SUSTAINABILITY

INTERVIEW WITH ANNA GEDDA, HEAD OF SUSTAINABILITY, H&M GROUP VISION & STRATEGY VISION VISION & STRATEGY “We must continue to dare and push the boundaries” 100% LEADING THE CHANGE

The fashion industry is going through a an important step in helping our customers I also wish that we could have come even major transformation. How is H&M group care for their favorite pieces longer and in further. But the issue of wages goes far positioning itself to be a part of this journey? that way prolong the lifespan of the product. beyond our own suppliers and their factories As a major player in the industry, we are and we alone cannot change the industry. well-positioned to not only be part of, but Looking back over the year, what has been This also goes for many other sustainability to also lead the change on this journey. One the greatest achievement? challenges, such as scaling technologies for area that we have been focusing on for a There are many things I’m proud to have garment recycling, developing solutions for

while is the shift from a linear to a circular been a part of, but one that stands out this microfibre shedding and driving transpar- & RENEWABLE CIRCULAR 100% business model, where we have the ambi- year is our results from the five-year Fair ency on sustainability performance across tion to become fully circular. Living Wage Strategy. We have not only the industry. We are also constantly innovating and achieved, but exceeded in all our goals, Another important lesson from this year is developing our sustainability work in line affecting the lives of almost one million the need to constantly keep sustainability with other developments in the industry. For garment workers. This has been the result of integrated into the business, which can be a example, we have accelerated our invest- many of my colleagues’ tremendous efforts challenge given the rapid change and trans- ments in AI and algorithm-driven retail and to make an impact and drive change in a formation that the retail industry is under- see them as important tools to not only very challenging area. There is still a lot to be going. In the light of the hoodie incident, we grow our business in a sustainable way, but done and I can’t stress enough the need of have learned that we need to do even more 100% FAIR & EQUAL FAIR 100% also reach our sustainability goals. alignment between different actors through- to integrate inclusion and diversity across out the whole industry. our operations and beyond. How do you see the customer becoming a Another achievement is our new packaging part of H&M group’s sustainability journey? strategy, which is an important milestone Back to H&M group leading the change Today we see a positive trend in customer towards our circular ambition. With our goal in the fashion industry transformation. behavior, where more and more customers to only use recycled or sustainably sourced Where do you see us in five years? Anna Gedda (right) with want to know where and how the garments packaging materials by 2030, we will be able I hope that we will continue to lead the colleagues during STANDARDS & POLICIES are made, and how they can contribute to to have a big environmental impact, create a change towards a sustainable fashion the Fair Living Wage Summit in a sustainable fashion future. This year, we better shopping experience for our custom- industry. With all the technological advance- Cambodia. have developed a customer-facing transpar- ers, and a better work environment for our ments and ever-changing expectations from ency layer where our online customers can colleagues. customers, it’s hard to have a clear picture see sustainability information such as mate- of what exactly will be happening five years boundaries. I hope that we will continue rials used, or in which factory the product … and what are the biggest lessons learned? from now. But I am positive, that by then we to stay true to our long-term direction and has been made. That big change takes a long time. For will see a wide use of both circular technol- at the same time keep our agility. And of We have also expanded our Take Care con- example, even though I am very proud of ogies and renewable energy that will move course, that we continue to dare, push REPORT WE HOW cept across more markets, which we see as our results of our Fair Living Wage Strategy, the fashion industry within the planetary boundaries, test, and never be afraid to fail.

H&M GROUP SUSTAINABILITY REPORT 2018 18 OF 109 OVERVIEW VISION & STRATEGY 100% LEADING THE CHANGE 100% LEADING THE CHANGE

100% LEADING & RENEWABLE CIRCULAR 100% THE CHANGE 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW

Photo credit: James Morgan/WWF.

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KEY FACTS & FIGURES 2018 / 100% LEADING THE CHANGE EXPLAINED / INNOVATION / TRANSPARENCY / REWARDING SUSTAINABLE ACTIONS

Key facts & figures 2018 VISION & STRATEGY 100% LEADING THE CHANGE 100% LEADING THE CHANGE

During 2019, H&M and H&M Home are rolling out a new transparency tool in their online stores, enabling customers to trace most 100% CIRCULAR & RENEWABLE CIRCULAR 100% of their products to the factory they have been made in, and find Since 2013 we make names further information to make of suppliers, addresses and We have accelerated our more conscious choices. other factory information work with artificial intel- public. Today this includes ligence by creating an AI 100% of our tier 1 sup-

department within H&M H&M Group was plier factories and tier 2 & EQUAL FAIR 100% group. This will further ranked amongst top 5 in factories who make about help us make the best and Fashion Revolution’s 2018 65% of our products – and most sustainable business index with a score of 55% fulfills the requirements of decisions possible. (highest score 58%). the transparency pledge. STANDARDS & POLICIES

Because investing in innovation unlocks circularity, we support companies

such as Moral Fiber and Colorifix. OUR LEADING THE CHANGE AMBITION HOW WE REPORT WE HOW CONTRIBUTES TO SDG 9, SDG 12 AND SDG 17.

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KEY FACTS & FIGURES 2018 / 100% LEADING THE CHANGE EXPLAINED / INNOVATION / TRANSPARENCY / REWARDING SUSTAINABLE ACTIONS

100% Leading the Change explained VISION & STRATEGY 100% LEADING THE CHANGE 100% LEADING THE CHANGE

100% Leading the Change is our commitment to catalyse change across the entire fashion industry and improve the way our products are designed and made. To do & RENEWABLE CIRCULAR 100% this, we bring diverse partners The new brand Afound, which resells great fashion, together to identify and share is H&M group�s most recent business venture. the challenges and innovative solutions that will push boundaries and deliver results.

This approach to leadership underpins 100% FAIR & EQUAL FAIR 100% our entire strategy, helping us fulfil our ambition to become both a 100% Circular & Renewable and a 100% Fair & Equal business. Our work centres on catalysing business and industry-wide change in three focus areas: STANDARDS & POLICIES • Innovation • Transparency • Rewarding sustainable actions HOW WE REPORT WE HOW Weekday collaboration with Peace Force H&M Conscious Exclusive. for a non-violent world.

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Innovation VISION & STRATEGY 100% LEADING THE CHANGE 100% LEADING THE CHANGE

Innovation is the key to achieving industry-wide change. “Working with innovation is a constant adventure”

Many of the sustainability challenges At H&M group, we have an internal inno- towards changing the fashion industry and facing our industry require intense innovation department called the Laboratory. are transitioning to a circular economy vation to find solutions. These challenges It is our home for research and develop- model while building a socially and environ- also present us with business opportuni- ment and it exists to challenge our think- mentally positive supply chain. That is a huge ties. For example, there is not yet a viable ing and give us fresh perspectives, turning shift, and much more than a trend, it is the & RENEWABLE CIRCULAR 100% technology for recycling of blended fibres research into action through co-creation, necessary future. We are proud to be one of at scale, which means we cannot make launching new business and service the leaders on this journey. new products from as many old products models. Laura Coppen works as Creative as we would like. To tackle this, we are Business Development at the Laboratory. What projects are you working with right currently working with experts who are now? developing new scalable technological What is it like to work with innovation? We are working on a concept that is centred solutions that will transform the way our Working with innovation is a constant around the future of local, smart and circular industry works with materials. adventure, one has to navigate through a manufacturing. This model enables us to global landscape of trends, both macro be faster to customers’ demands and test 100% FAIR & EQUAL FAIR 100% At H&M group, we have a responsibil- and micro, identifying the key areas that new technologies like custom fit, customi- ity, as well as an opportunity to iden- will disrupt our industry. For me, working zation and small batch collections with new tify, invest in and promote sustainable with innovation means collaborating; we machinery. We are also looking into several innovations, from digital systems that work with an external and internal net- areas within service models, from remaking, provide traceability information to new work of experts to support us and make to renting and renewing products. Alongside energy-saving solutions. Our size and our concepts come to life. In today’s new packaging solutions and the greater

ever increasingly complex landscape it’s system around online logistics. STANDARDS & POLICIES global reach means we can take the most Laura Coppen. promising sustainable innovations to necessary to look at the whole picture, the scale and help create the transformation whole system. How can innovation help us achieve our our industry needs. sustainability goals? ness models, which we are on the journey What trends do you see when it comes Innovation is a necessary part of reaching of creating with many of our partners. Right HOW WE APPROACH INNOVATION to innovation? our sustainability goals. With the huge shift now, an intrapreneurial spirit is needed – in To make our business better, we use The trend I’m most focused on is the rise that we need to make in the fashion indus- all companies, including ours – to achieve innovation to challenge our thinking in responsible businesses and service try, we can’t rely on what already exists. We the sustainability goals. It’s an ‘all hands on HOW WE REPORT WE HOW and give us new perspectives. Across models. These have an action-driven agenda need new materials, processes and busi- deck’ time! our company, we prototype ideas that

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KEY FACTS & FIGURES 2018 / 100% LEADING THE CHANGE EXPLAINED / INNOVATION / TRANSPARENCY / REWARDING SUSTAINABLE ACTIONS demonstrate – both internally and externally – VISION & STRATEGY that our commitment to sustainability demands Moving towards sustainable fashion with the help of AI both a new way of working and a new way of thinking. Arti Zeighami, Head of Advanced even more relevant offering for our Analytics and AI at H&M group: customers, we are reducing the envi- Our approach to innovation always starts by How are your colleagues using ronmental impact of our operations. looking at our customers’ needs alongside the AI tools in their work? AI and advanced analytics are great

macro and micro trends that are changing our When we talk about AI at H&M group, tools for reaching our sustainability 100% LEADING THE CHANGE 100% LEADING THE CHANGE industry and the world around us. We then we mean Amplified Intelligence. goals, and it is equally important to employ a design and system thinking approach to Advanced analytics and machine have a sustainable and ethical problem solving and innovation. Finally, we take learning are tools that enhance our approach when we work with AI. This the best and most promising innovations and use human intelligence. Amplified intelli- is a high priority for us, and our work our size to help them scale. gence is the collaboration between on sustainable and ethical AI is part machines and humans – between of the overall vision of leading the This involves looking at the wider systems and science and art, data and gut feeling. change towards circular and renew- trends we are a part of – both now and in the We are creating solutions that help our able fashion while being a fair and future. We have an opportunity to rethink how colleagues make more precise deci- equal company. & RENEWABLE CIRCULAR 100% we organise global production and consumer sions, and enable them to focus on the demand, and to access cutting edge technologies most relevant and creative parts of If you look ahead, what part do Arti Zeighami. and innovative business models. We have a wide their work. you think AI will play in the journey network of partners that help us identify and towards a circular business model? pilot innovation and take them to scale. What is the connection between advanced analytics and AI, we can be I think it is one of the most powerful AI and sustainability? much sharper in aligning supply and tools we have in the transition towards ALGORITHM-DRIVEN RETAIL Circularity is ultimately about demand. This could also entail less a circular and sustainable fashion sys- To further secure an organization that drives using resources sustainably, where transport and warehousing, which tem. With AI we can make sharper and innovation and optimizes business decisions one central aspect is to avoid means less energy is used. It’s really better decisions that impact our world 100% FAIR & EQUAL FAIR 100% which enable sustainable choices, H&M group over-production. With the help of a win-win situation: while creating an in a sustainable way. is working with advanced analytics and artificial intelligence. Our new AI department supports various processes across our entire value PROGRESS prototypes together as cross-company • We are in the process of identifying chain – from design to customer experience. For • We have created an AI department and cross-industry teams. key stakeholders and partners to example, by amplifying the decision making of within H&M group and are setting strate- drive ethical AI work within our field. our designers and buyers we can ensure that we gies on how to advance algorithm driven • Our company’s extensive prototyping STANDARDS & POLICIES are designing the right products. We also use retail technology in a sustainable way. and testing of new ideas means that LEARNING advanced analytics and AI to better forecast different functions sometimes come • Advanced analytics and AI are trends, make sure the right products are in the • H&M group’s the Laboratory joined up with the same ideas. To capitalise great tools in helping us reach our right stores, and to give our customers even more IDEO’s Circular Economy CoLab, a col- on this culture of innovation and sustainability goals, and it is important relevant and customized recommendations and laborative innovation lab with member ensure we’re all pulling in the same to have a sustainable approach when offers. Used right, AI is one of the most powerful companies interested in exploring the direction, we have streamlined our pro- we work with AI. Sustainable and tools we have to secure that we meet our future potential of circular economy busi- cesses and put cross-functional teams ethical AI is at the top of our agenda in a sustainable way through the lens of a circu- ness models. We worked in a human- in place that can identify and push the and we appointed a Head of AI Policy REPORT WE HOW lar economy. centered design process, building best ideas forward. in 2018.

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Investing in fashion future H&M Foundation’s Global Change Award VISION & STRATEGY

H&M CO:LAB is a business area which invests in The Global Change Award is one of companies that can add value to our business. the world’s biggest challenges for During the last few years, we have invested early-stage fashion innovation. Initiated in innovative companies such as Worn Again, by the non-profit H&M Foundation,

Re:newcell, TreeToTextile, Thread, amongst others. it calls for ideas that accelerate the 100% LEADING THE CHANGE 100% LEADING THE CHANGE In 2018, we have further expanded our portfolio shift from a linear to a circular fashion with the following investments: industry. This means changing the way garments are designed and produced, Moral Fiber was among the first winners of the shipped, bought, used, and recycled, Global Change Award in 2016. The American inno- by adding disruptive technology or vation company focuses on chemical recycling of new business models. polyester fabrics. Our investment in Moral Fiber helps us speed up the acceleration of recycling With almost 15,000 entries from

technologies available at scale. 182 countries since its inception, the & RENEWABLE CIRCULAR 100% award is the go-to competition for Colorifixhas developed the first commercial bio- circular innovation and has been logical dyeing process to help the textile industry called the Nobel Prize of fashion. reduce its environmental impact by using fewer chemicals, and less energy and water. The tech- The award’s five annual winners are nology is scalable and does not require existing selected by a panel of international infrastructure to be rebuilt. We will work closely experts. Amongst this year’s innovators with Colorifix to support their pilot projects in the was a company making sustainable textile supply chain. bio-textiles by using left-overs from 100% FAIR & EQUAL FAIR 100% food crop harvests. As well as their share of the € 1,000,000 grant, winners are invited to an innovation accelerator provided by H&M Foundation, Accenture and KTH Royal Institute of H&M group’s CEO Karl-Johan Persson together Technology in Stockholm, which offers with the winners of Global Change Award 2018 at the ceremony in the Stockholm City Hall.

focused support to further develop STANDARDS & POLICIES their innovations. raw material to a garment’s end of Neither the H&M Foundation nor H&M During the fourth year of Global life. Digitalization has the potential to group take any equity or intellectual Change Award, H&M Foundation kept disrupt at the root, reinvent how things property rights in the innovations. The an extra eye on digital innovation. are done and help producers, sellers aim of the challenge is to find innova- “Digital innovations can make signifi- and customers to become circular”, tions that allow major change for the cant impact on efficiency planning and says Erik Bang, Innovation Lead, H&M entire industry, and the winners can resource use – all the way from making Foundation. collaborate with whomever they want. REPORT WE HOW

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Transparency VISION & STRATEGY 100% LEADING THE CHANGE 100% LEADING THE CHANGE

Transparency is the key to build trust and enable customers to make conscious choices. It is also an important driver for Helping our customers make conscious choices improved performance and creation of stronger impact across During 2018, a tight-knit team of sustain- our value chain. Beyond disclosing where and by whom our ability experts, IT architects, business developers and other experts from products are made, we also work to make the impacts of how across H&M group has worked intensely they are made measurable and comparable. to develop a solution through system & RENEWABLE CIRCULAR 100% integration and automation. Combin- We are convinced that transparency is measurable and comparable across ing this solution with the results of our the foundation for gaining trust and the industry. In this way, transparency in-depth customer research, during 2019 building strong relationships – with becomes a key tool to lead the change we will be offering the following in our our customers, colleagues, investors, towards a sustainable fashion industry. online stores: business partners and other stakeholders. That’s why we provide transparent We are working on transparency in two • Information about each product’s mate- information about our business and key areas: rial, including how sustainable it is, and our specific sustainability goals for it. value chain through various channels & EQUAL FAIR 100% and dialogues – this report being just 1. TRANSPARENCY TO EMPOWER one of them. By sharing our ambitions, THE CUSTOMER’S CHOICE • Where each product is produced, down challenges, solutions and progress in an We are committed to inspiring our cus- to a country, supplier and factory level. open and honest way, we can collaborate tomers to make more sustainable choices. more effectively with others, and gain One way we can do that is by bringing • Information about how to recycle the mutual trust. the story behind the product closer to the garment and why it is important to do so. customer, which means being transpar- STANDARDS & POLICIES However, we believe there is more to ent about exactly where and how it has This function will be available for all our be done. We want all the players in our been made, the materials used, and its own textiles, footwear, and accessory value chain to be able to make conscious social and environmental impacts. In products in our online store at H&M and and informed choices. That means we recent years, we started sharing product H&M Home. Looking ahead, we want to need to make it easier for consumers to stories for H&M’s Conscious Exclusive see an industry standardised index for understand where and how the products collection and ARKET’s regular assort- each product that makes it even easier they buy have been made. It also means ment. For some ARKET products, we also for our customers to make sustainable HOW WE REPORT WE HOW we need to create even greater traceabil- share the material supplier’s name. In choices. ity in our value chain, and make impacts 2019, we will take this a step further and

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KEY FACTS & FIGURES 2018 / 100% LEADING THE CHANGE EXPLAINED / INNOVATION / TRANSPARENCY / REWARDING SUSTAINABLE ACTIONS make it possible for H&M and H&M Home customers to see more specific information for most Enabling informed decisions through consumer-facing transparency VISION & STRATEGY of our products. This includes information such as in which factory a product was made and what Sarah Ditty, you are a Policy Director materials were used to make it. at Fashion Revolution: What is consumer-facing transparency for you? Creating this transparency is a big and important For Fashion Revolution, transparency step, but it doesn’t immediately show how sus- means credible, comprehensive and 100% LEADING THE CHANGE 100% LEADING THE CHANGE tainable a product is. To answer this question, comparable public disclosure of data we need a common measurement for fashion and information about brands and products that allows consumers to compare in a retailers’ supply chains, business prac- simple and trusted way. This is why we have been tices and impacts of these practices on involved in developing the Higg Index. workers, communities and the environment. Transparency is not just sharing H&M group is one of the founding members of the good stories, nor disclosing only the Sustainable Apparel Coalition (SAC), an compliant, well-performing suppliers.

industry-wide alliance that, among other activ- It’s about presenting the full picture, & RENEWABLE CIRCULAR 100% ities, is developing the Higg Index – a tool to both good and less good, in the effort help create a more transparent and sustainable to allow for greater scrutiny and to fashion industry. The Higg Index aims to score help drive faster improvements. There sustainability performance, making it easier for is power in sharing the challenges we customers to benchmark brands, manufacturers all face, as well as where progress has and individual products so that they can make been made. more sustainable choices. Why is it important? Creating the required alignment within the Transparency information allows

Sarah Ditty. & EQUAL FAIR 100% fashion and design industry is taking longer consumers to make more informed than we expected. We have been pushing for this decisions about the impacts of the alignment from the beginning but, as with other products they buy. If companies truly to publish a list of its manufacturers rable, easy-to-use and verifiable data collaborations, bringing many actors together is want to build sustainable businesses and suppliers, a crucial step towards and information about H&M group’s a significant challenge. Nevertheless, we are con- for the future, they need their custom- greater accountability. This information practices and impacts in the future. We fident that the Higg Index will become a trusted ers to act more responsibly and sus- helps trade unions and other civil soci- are excited to see transparency infor- tool for consumers. tainably and that requires awareness, ety organisations to better understand mation provided at the product level. STANDARDS & POLICIES information and education. This is what where products are being made. H&M This is a huge step forward, enabling consumer-facing transparency can do. scores within the ten highest brands in customers to make more informed Companies can literally help create our annual Fashion Transparency Index, decisions about the products they buy better future customers. and this shows that H&M is striving from H&M. Hopefully in the future this year-on-year to provide more informa- sort of transparency will be available How do you see H&M group’s role tion about its sustainability policies, to consumers on every product they and performance in this area so far? practices and impacts. We hope to see purchase from any brand or retailer, H&M was one of the first major brands even more comprehensive, compa- big or small. REPORT WE HOW

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PROGRESS H&M group hosted a • We were ranked in the top 5 of Fashion Transparency Hack in VISION & STRATEGY Los Angeles. Revolution’s Fashion Transparency Index, scoring 55% (highest score 58%). While we acknowledge this recognition, we know there is more for us to do.

• Scaling our transparency work, we 100% LEADING THE CHANGE 100% LEADING THE CHANGE developed a solution that will provide our customers with sustainability information on products for H&M and H&M Home.

• We arranged a Transparency Hack in Los Angeles, USA, bringing together future generations, thought leaders and change-makers with tech, sustainability

and fashion expertise for a day full of & RENEWABLE CIRCULAR 100% ideation sessions. The aim was to present scenario solutions for a transparent fashion future. We believe that if we colla borate across the industry and use new technologies such as blockchain and AI, we can push the fashion industry towards becoming fully transparent.

• ARKET has conducted a pilot project to better understand the usage of blockchain & EQUAL FAIR 100% in connection to transparency. Blockchain is a ledger or table that businesses use to keep track of their credit and debit. The distinguishing feature of block chain is that it cryptographically chains verified

data into blocks. That means once info is STANDARDS & POLICIES added into the system it can’t be modified without everyone connected into the chain being informed. diverse membership, each with their own • Over the years we have learned that it research to address this gap. H&M joined commitments and timelines. While we are is very difficult to find solutions that suit an insight study with several other fash- LEARNINGS confident that the Higg index will deliver customers’ needs for sustainability infor- ion brands in SAC to learn more about • We are working hard to promote a con- as a ground-breaking tool for transparency mation. There is currently little knowledge customer expectations in China, Europe sumer-facing Higg Index so our customers and comparability, we acknowledge that available on how exactly customers want and the US.

can compare a product’s sustainability creating a common standard for so many further information. That is why, amongst REPORT WE HOW performance across brands. SAC has a actors takes time. other things, we are conducting further

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2. TRANSPARENCY TO DRIVE transparent supply chains and dis- SUSTAINABILITY IMPACT IN closures on the impact on people and VISION & STRATEGY SUPPLY CHAIN the planet. SAC’s Higgs Index creates In 2013, we were one of the first fash- a ‘common language’ for transparent ion retailers to make our supplier list product information, allowing compa- public. This list includes tier 1 manu- rability across brands. facturing supplier factories for 100% of H&M group products and tier 2 100% LEADING THE CHANGE 100% LEADING THE CHANGE factories, which account for 65% of our products. Creating greater traceability in our supply chain means knowing exactly where our products (and their materials) come from. One of the biggest challenges in creating greater traceability is collecting trusted data throughout our supply chain. We see

that new emerging technologies such & RENEWABLE CIRCULAR 100% as blockchain can potentially help us tackle this challenge.

Mapping the apparel industry’s complex supply chains is both a joint & Other stories. effort and a groundbreaking and unparalleled initiative. Within the frame of SAC, the sharing of data for PROGRESS brands, textile manufacturers, mills • H&M group signed the Transparency 100% FAIR & EQUAL FAIR 100% and material suppliers’ locations and Pledge and added more detailed sustainability performance on a joint information to our public supplier list. platform is a significant step towards Our supplier list covers 100% of our public transparency. However, because tier 1 and 65% of our products with of some unanimity issues within SAC tier 2 suppliers. We have also added membership, the timelines for devel- strategic tanneries this year.

oping a transparency platform for data STANDARDS & POLICIES sharing are somewhat delayed. • 100% of our tier 1 and tier 2 supplier factories* used the Higg Index Facility H&M group recently joined the Exec- Environmental Module during 2018, utive Board of SAC to further drive making us one of the widest users industry-wide transparency of the of the first tool developed by SAC. fashion and apparel industry. This is For more information on the perfor- needed now more than ever, with the mance, see page 96. increased expectations from custom- REPORT WE HOW *Apparel and footwear supply chains excluding H&M Home. ers, stakeholders and legislators for factories with less than 25 employees.

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Rewarding sustainable actions VISION & STRATEGY 100% LEADING THE CHANGE 100% LEADING THE CHANGE

We believe it is important to encourage and empower sustainable actions throughout our value chain. Because we know incentives and reward systems help achieve long-term, positive behavioural changes, we are using them to engage our business partners, colleagues and customers to accelerate progress towards our sustainability vision. & RENEWABLE CIRCULAR 100%

We have developed and are using across functions within H&M group. different reward systems, tailored to Crucially, this includes goals set at an the needs of our three changemaker executive level. We include sustaina- H&M Paris. & Other Stories. groups. bility goals in our overall management evaluation process and we regularly BUSINESS PARTNERS follow up on function specific goals. Rewarding customers for garment collecting We are working with our business part- We encourage colleagues to contribute H&M All H&M stores ship with I:CO, & Other These can be found in all ners through our Sustainable Impact to change in the workplace and in their

around the world encour- Stories also encourages Monki stores, anywhere & EQUAL FAIR 100% Partnership Programme (SIPP) to raise communities through a range of strate- age customers to bring customers to return the in the world. their environmental and social perfor- gies and activities. unwanted garments and brand’s empty beauty mance. We reward high-achieving and textiles for recycling, containers for recycling. WEEKDAY All Weekday ambitious partners with more orders, CUSTOMERS re-wear or reuse. Custom- Customers are rewarded stores in Sweden currently training opportunities and long-term To achieve our sustainability ambi- ers can use the in-store for sustainable behaviour offer garment collecting. contracts. This helps drive environ- tions and drive change across our garment collecting scheme with 10% off their next This initiative will be rolled mental and social progress across our industry, we also need active partic- to return garments from purchase. out worldwide during 2019 STANDARDS & POLICIES whole industry. Read more about SIPP ipation from our customers. We offer any brand, in any condition. and will offer customers on page 95. our customers incentives for sustai As a reward, we offer a MONKI All Monki custom- who bring in their unwanted nable actions, which can increase voucher towards their next ers are rewarded with a garments a 10% discount COLLEAGUES customer interest and knowledge in H&M purchase. “10% off your next pur- on their next purchase. We want all our colleagues to contrib- sustainability and create positive chase” voucher when they ute to our sustainability work and we behavioural change. In this way, we & OTHER STORIES As bring a bag of unwanted AFOUND Offers garment reward them for doing so. This involves encourage our customers to re-wear, well as collecting textiles textiles for the garment and shoe collecting in all HOW WE REPORT WE HOW implementing and measuring sustain- reuse and recycle unwanted clothes via H&M group’s partner- recycling service. physical stores. ability goals at different levels and whenever possible.

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100% CIRCULAR & RENEWABLE CIRCULAR 100% & RENEWABLE 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW

COS.

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KEY FACTS & FIGURES 2018 / KPIS AND GOALS / 100% CIRCULAR & RENEWABLE EXPLAINED / BECOMING CLIMATE POSITIVE

Key facts & figures 2018 VISION & STRATEGY 100% LEADING THE CHANGE

We reduced CO₂ We set a new circular emissions from our own packaging strategy operations by a further and roadmap for the 11% compared with 2017. entire value chain. 100% CIRCULAR & RENEWABLE CIRCULAR 100%

WE HAVE DEVELOPED A NEW WATER ROADMAP We launched Afound, a brand FOR OUR SUPPLY CHAIN WHICH CONTAINS OUR with the mission of giving KEY GOALS AND ACTIONS UP UNTIL 2022. unsold products a new life.

H&M Group has developed 95% of cotton & EQUAL FAIR 100% 57% of all materials we use 2030 GHG emissions reduc- used by H&M Group to make our products are tion goals that have been is recycled or other recycled or other sustaina- approved by the Science sustainably sourced. bly sourced materials. Based Targets initiative. STANDARDS & POLICIES

We collected 20,649 tonnes of textiles for reuse and recycling through our garment collecting initiative. That’s 16% more than last year and represents the

equivalent of 103 million t-shirts. OUR CIRCULAR AND RENEWABLE AMBITION REPORT WE HOW CONTRIBUTES TO SDG 6, 7, 12, 13, 14, 15, 17.

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100% Circular & Renewable: KPIs and goals VISION & STRATEGY 100% LEADING THE CHANGE

Goal-setting is an ongoing process. We work with experts – both internally and externally – and follow a science-based approach to define targets and actions wherever possible. The KPIs and goals below represent the initial key milestones along the way to achieving our ambition to become 100% Circular & Renewable.

100% Circular & Renewable

KPI 2015 2016 2017 2018 GOAL & RENEWABLE CIRCULAR 100%

% of recycled or other sustainably sourced materials of total material use (commercial goods) 20% 26% 35% 57% 100% by 2030 at the latest

% of recycled or other sustainably sourced cotton (certified organic, recycled or Better Cotton) 34% 43% 59% 95% 100% by 2020

Tonnes of garments collected through garment collecting initiative 12,341t 15,888t 17,771t 20,649t 25,000t per year by 2020

% of stores with recycling systems for main types of store waste 61% 71% 64% 63% 100%

% of facilities in own operations with water-efficient equipment 37% 51% 51% 64% 100% by 2020 100% FAIR & EQUAL FAIR 100% % supplier factories in compliance with ZDHC wastewater standard 75% 82% 84% 87% 100% for conventional parameter*

% renewable electricity in own operations 78% 96% 95%** 96% 100%

% change in CO2 emissions from own operations (scope 1 + 2) compared with previous year –56% –47% –21% –11% Climate positive by 2040

% change in electricity intensity (kwh/sqm per opening hour compared with 2017) n/a n/a –2.7% –8.2% –25% by 2030 STANDARDS & POLICIES

*2017 data is compliant with BSR, 2018 data and forward is compliant with ZDHC. **Due to inaccuracy in calculation, the 2017 share has been corrected from 96% to 95%. HOW WE REPORT WE HOW

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100% Circular & Renewable explained VISION & STRATEGY 100% LEADING THE CHANGE

Our planet provides us with an customers care for and dispose of our products. A business model can only be truly cir- abundance of natural resources. cular if it’s powered by renewable electricity, However, with global demand rapidly which is why we are planning to use 100% outstripping supply, the fashion renewable electricity throughout our own operations. Ultimately, our goal is to achieve industry cannot continue to operate a climate positive value chain – a value chain as it has in the past. At H&M group, that creates a net positive impact on the & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% STAGE A climate by 2040. we believe that an industry-wide shift Design from a linear to a circular business Making fashion circular also presents a model is the only solution. strong business case. By designing for circularity, maximising resource use by working Circular models maximise resources and with recycled or other sustainably sourced minimise waste. Using the current linear Our materials, prolonging product lifespan and STAGE E STAGE B model, less than 1% of material used to pro- creating a climate positive value chain, we Product reuse & circular Material choice duce clothes across the industry is recycled recycling will increase the efficiency and the value of 100% FAIR & EQUAL FAIR 100% into new products.* But in a circular model, approach our operations and products. This will ena- resources stay in use for as long as possible ble us to continue designing and producing before being regenerated into new products great, sustainable products while creating and materials, resulting in a reduction in positive social and environmental impacts. waste and negative impacts. They also open for new business opportunities, such as our To become 100% circular, we are focusing on newly launched Take Care concept that offers five key stages within our value chain that STANDARDS & POLICIES STAGE C products, services, inspiration, and guidance are applicable to both commercial and non- STAGE D Production on expanding the life of garments (read more Product use processes commercial products: on page 49). A. Design To fulfil our 100% Circular & Renewable B. Material choice ambition, we are building circularity into C. Production processes every stage of our value chain; from the prod- D. Product use ucts we design and make, to the packaging, E. Product reuse and recycling REPORT WE HOW materials and processes we use, to how our * Source: A New Textiles Economy: Redesigning Fashion’s Future by Ellen MacArthur Foundation and CFI.

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STRATEGIC TARGETS FOR The project adopts a global perspective SUSTAINABLE FASHION and incorporates the whole fashion Collaboration with MFC: Creating a fashion VISION & STRATEGY H&M group is working strategically value chain. It combines the principles on sustainability, using science and of the circular economy from the Ellen industry of the future partnerships to help us lead the MacArthur Foundation with the science Make Fashion Circular (MFC) exists change towards a circular and renew- of planetary boundaries from the Stock- to drive the level of collaboration and able fashion industry. We are con- holm Resilience Centre. innovation necessary to create a fash- tinuously developing new goals and ion industry that can thrive in the future. 100% LEADING THE CHANGE roadmaps in all areas of our circular The principles of a circular economy approach. act as guidelines for how the fashion The group brings together leaders industry can thrive while remaining from a wide range of backgrounds, One example is our research project within the earth’s limits. That means including brands, cities, philanthro- with the Ellen MacArthur Foundation designing out waste and pollution, pists, NGOs and innovators. H&M and Stockholm University’s Stockholm keeping products and materials in use, group is a core partner of MFC, which Resilience Centre. The project, “A cir- and allowing nature to regenerate. Plan- means we are collaborating with other cular fashion industry within planetary etary boundaries highlight the extent core partners to lead the transition to boundaries”, is an ongoing collabo- to which human activities can impact a circular economy. & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% ration continuing through 2019. The the environment without harming our project team is using a science-based planet’s critical ‘life support systems’. In This year, MFC has created working approach to help H&M group and the other words, planetary boundaries mark groups to focus on new business wider industry set targets for a more the edges of the playing field while the models that increase clothing use, sustainable fashion future. circular economy shows us how to play. inputs that are safe and renewable, and solutions for turning used clothes into new ones. 100% FAIR & EQUAL FAIR 100% Collaboration and innovation are key to creating “a fashion industry where clothes are used more and never become waste. As a core partner of

Make Fashion Circular, and a brand with signif- STANDARDS & POLICIES icant global presence, H&M group is playing an essential role in driving momentum towards this new vision for the industry.”

FRANCOIS SOUCHET, LEAD, REPORT WE HOW Photo credit: Tiffany Tsang. MAKE FASHION CIRCULAR

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OUR PACKAGING STRATEGY developed between the Ellen MacArthur CIRCULAR BUILT ENVIRONMENT We take a holistic circular approach to Foundation and UN Environment. This We want to lead the change and take a VISION & STRATEGY packaging, taking all the stages of the represents a unique opportunity for busi- holistic approach towards circular built value chain into account. Packaging, nesses and governments to step forward environment, increasing our operational particularly when it’s made from plastic, as global leaders working on solutions efficiency and the longevity of our stores has a big environmental impact – from that address the root cause of plastic and offices. To do this, we are developing raw materials, to manufacturing, to use waste and pollution. In the agreement, a strategy that covers the whole value and disposal. Our industry, as well as we commit to: chain within our built environment. 100% LEADING THE CHANGE others, need to shift from a linear to While we’re working on this, we continue a circular packaging model. Plastic • Take action to eliminate problematic to collaborate with suppliers and exter- packaging is front-of-mind for custom- and unnecessary plastic packaging nal experts to identify and implement ers, colleagues and legislators, which by 2025. actions that can shift us from linear to means we have a good opportunity for circular stores and offices. rapid change in this area. • Take action to move from single-use towards reuse models where relevant We have continued to work with the During 2018, H&M group collaborated by 2025. Ellen MacArthur Foundation to develop

with the Ellen MacArthur Foundation to tools to assess the circularity of our & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% develop a circular packaging strategy that • 100% of plastic packaging to be non-commercial goods and suppliers. covers the reduction of packaging used, reusable, recyclable or compostable We have started the implementation circular design, material use and re-use, by 2025. & Other Stories beauty products. and are continuing our work to achieve and recycling systems. the already set goal, that at least 80% of new store concepts (H&M brand to begin We want to lead the change in circular with), should be circular by 2025. packaging, both for commercial and non-commercial goods, and have set For example, we recently rebuilt one of the following goals: our H&M stores in Stockholm, Sweden, using mainly building materials and & EQUAL FAIR 100% • We have set a circular design goal that interiors from existing store materials, all packaging should be designed to production samples or previous purchase be reusable, recyclable or compostable leftovers. This shortened the lead-time by 2025. along the entire value chain, maximised the value and use of the resources, and

• We will use 100% recycled and other reduced our climate impact. We are cur- STANDARDS & POLICIES sustainably sourced materials by rently looking into scaling this project. year 2030.

• We will reuse or recycle 100% of packaging waste from our own sites by 2025.

In addition to our circular packaging strategy, H&M group has signed the New REPORT WE HOW Plastic Economy Global Commitment, H&M store in Stockholm built using mainly reused materials.

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A. Design VISION & STRATEGY 100% LEADING THE CHANGE

Design is our first in sample rounds and use of resources. Now, designers are able to iterate on opportunity to bring products in 3D, until they are sure it’s circularity into our value the right style. This removes the room chain. Incorporating for error both in designing the desired products for our customers, but also circular thinking early on paves the removes potential communication way for later stages to follow suit. errors between us and factories. & RENEWABLE CIRCULAR 100%

Circular design involves addressing the quality and durability of products, as well as their chemical input, materials and production processes. It also means finding ways to expand product lifespan, enabling better care and repair for our products COS: Repurposing cut offs through design and creating greater opportunities for rewear, reuse and recycling. We also apply circular design to our This hoodie was designed using COS has always worked according to cut offs are now collected, shredded, NCG (Non-Commercial Goods), such as packaging 3D visualization technology. the principles of timeless, functional compacted, spun, knitted, dyed and 100% FAIR & EQUAL FAIR 100% and stores, to increase their operational efficiency and considered design. This approach constructed into sweatshirts. The recy- and longevity. PROGRESS honours longevity and durability, and cled cotton is blended with some virgin • We have set a circular design therefore translates well into circular cotton to ensure its quality meets our CIRCULAR GARMENT DESIGN goal that all packaging should be thinking. Following the recent success customers’ high expectations. All H&M group brands have their own teams of designed to be reusable, recyclable of the capsule collection “10”, which designers and buyers. Having a circular approach or compostable by 2025. focused on clever patternmaking and COS used a new recycling supplier to in the design stage is crucial for creating circular garment construction to reduce cut off process the fabric, but the sweatshirt STANDARDS & POLICIES products. Our designers are trained in choosing the • H&M group has signed up to the waste, the brand launched the Repur- itself is produced in the same factories right materials, which means choosing materials Global Fashion Agenda’s Circularity posed Cotton Project. and using the same high standards as that are recycled or sustainably sourced and suited Commitment. This exists to encour- all other COS garments. That means not to longevity, reuse and recyclability. age more companies in the fashion Despite minimising cut offs as much only is this product made from recycled industry to support and practice the as possible, COS knew there was still fabric, it is also durable by design. It’s We are continuing to develop our circular design principles of circularity, including some high-quality cotton going to early days, but the project could save strategy. During the past few years we have been uti- circular design goals. We continue to waste in their supply chain. Through up to 1.5 tonnes of cotton cuttings from lizing the latest technologies in 3D visualization of report progress on the Global Fashion the Repurposed Cotton Project, these going to waste every year. REPORT WE HOW fabrics and products, which has lead to a reduction Agenda Circularity Commitment.

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B. Material choice VISION & STRATEGY 100% LEADING THE CHANGE

Our goal is to use 4.1. SHARE OF RECYCLED OR OTHER SUSTAINABLY SOURCED MATERIALS 100% recycled or other sustainably sourced 100% materials by 2030 at the GOAL 2030 latest. In 2018, we achieved 57%. RECYCLED OTHER SUSTAINABLY Recycled materials are a win-win: they stop waste SOURCED MATERIALS* & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% material from going to landfill and reduce the use of virgin raw materials (as well as chemicals, energy 1.4% and water used to make them). Similarly, sustainably sourced bio-based materials are naturally grown or cultivated, and better from an environmental perspective. 0.5% H&M Conscious Exclusive. 55.2% We use third-party verified lifecycle assessment data 0.7% 35% to evaluate the sustainability credentials of recycled Recycled materials 0.5% & EQUAL FAIR 100% and sustainably sourced materials. This includes 26% H&M group uses several types of recycled mate- 0.2% LCA data as well as external material benchmarks 19% rials, including recycled cotton, polyester, nylon, based on LCA data, such as the Material Sustaina- 13% wool, cashmere, plastic, silver and down. We are bility Index within the Higg Index. constantly working to increase our use of recycled materials. However, for many types of textiles, par- We have specific sourcing policies for many of our ticularly blended fibres, viable recycling solutions raw materials. These typically require the use of 2014 2015 2016 2017 2018 either do not exist or are not commercially availa- STANDARDS & POLICIES credible third-party certification schemes to ensure *Not all sustainably sourced materials can be naturally grown ble at scale. or cultivated i.e. minerals or stones. In these instances, we sustainable sourcing, such as Organic and recycled set up material-specific policies such as the use of external standards, the Forest Stewardship Council (FSC) standard schemes to secure sustainable sourcing. To tackle this challenge, we are creating demand and the Responsible Wool Standard (RWS). for solutions and working with scientists and PLUS, an initiative which seeks to identify, optimise innovators, including investments in Worn Again, We are collaborating with industry experts to and accelerate sustainable materials while making Re:newcell and Moral Fiber, and engagement in, ensure we successfully integrate recycled and them widely available. So far, it has awarded grants for example, DEMETO/GR3N, Fashion Positive HOW WE REPORT WE HOW sustainably sourced materials into our value chain. to three recycling technology developers – Worn PLUS and H&M Foundation’s Hong Kong Research For example, we are working with Fashion Positive Again, Moral Fiber and Tyton BioSciences. Institute of Textiles and Apparel (HKRITA).

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PROGRESS • H&M group is part of DEMETO, a VISION & STRATEGY • 57% of the materials used by H&M research project for polyester recycling group were recycled or other sustain- with an objective to build a pilot plant ably sourced. This is an increase from designed to treat about 500 tons of poly- 35% in 2017. ester waste per year. The project is funded by the EU and its partners.* • We have set a goal to only use

recycled or other sustainably sourced LEARNINGS 100% LEADING THE CHANGE material for packaging by 2030. • The use of any synthetic fibre creates the challenge of microfibre shedding. • H&M group is the second biggest We are taking this very seriously and are user of recycled cotton in the world, looking for solutions. You can read more and the sixth biggest user of recycled on page 48. polyester. This is according to The Textile Exchange’s Preferred Fiber • We want to further accelerate the use of & Materials Market Report 2018. recycled fibres in our products. However,

to do this and to be able to recycle all & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% • We used the equivalent of over 325 fibre types and blends at scale we need million plastic PET bottles in our recy- more technological advancement in recycled polyester. cling technologies. H&M group supports The award-winning hydrothermal recycling technology has been put into this development by investing and col- practice at scale, using only heat, water and less than 5% of a biodegradable • Several of our brands continued laborating with innovators such as Worn green chemical to recycle cotton and polyester blends into new fibres. to replace conventional polyester Again, Re:newcell and H&M Foundation’s and nylon with recycled alternatives. Hong Kong Research Institute of Textiles ARKET and H&M worked with a 100% and Apparel (HKRITA). H&M Foundation launches ground-breaking regenerated nylon fibre material called

textile-blend recycling facility & EQUAL FAIR 100% Econyl®, while all Weekday swimwear was made from recycled nylon and In 2016, the H&M Foundation opened a recycling facility growing global population,” recycled polyester. and the Hong Kong Research in Hong Kong, the first of its says Erik Bang, Innovation Institute of Textiles and kind, putting the new tech- Lead at H&M Foundation. • We used recycled silver to make Apparel (HKRITA) formed a nology into practice at scale. jewellery in H&M’s Conscious Exclusive four-year partnership which, The H&M Foundation’s

collection 2018. By recycling metals, we in 2017, led to a technological “This is a significant step 5.8 million euro projected STANDARDS & POLICIES avoid the negative impacts of mining. breakthrough. Using a hydro- towards a new fashion investment in HKRITA has thermal method, HKRITA industry that operates within been made possible through • We invested in Moral Fiber, an Ame presented a solution for the planetary boundaries. As the surplus from the H&M rican innovation company developing recycling cotton and polyes- we scale up and make this group’s in-store garment col- a unique technology for polyester ter blends into new fibres. technology freely available to lecting programs. The H&M recycling. the industry, we will reduce Foundation allocates 50% of In autumn 2018, the H&M the dependence on limited the total donated surplus to *The DEMETO project has received funding Foundation and HKRITA natural resources to dress a research on textile recycling. REPORT WE HOW from the European Union’s Horizon 2020 research and innovation programme under grant agreement no 768573.

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Sustainably sourced COTTON formed to tackle sector-wide challenges PROGRESS VISION & STRATEGY materials Our goal is to use 100% sustainably and accelerate the growth of the organic • 95% of our cotton was recycled or sourced cotton by 2020, which includes cotton market. In 2018, prototype-sourcing other sustainably sourced cotton (Better The production of many of the raw mate- certified organic cotton, Better Cotton pilot projects in India delivered results and cotton, organic or recycled cotton). rials used in our products both depends (BCI) and recycled cotton. learnings to guide us in securing supply on and impacts natural landscapes and chain transparency and integrity. It was • H&M group is the biggest user of their biodiversity. We depend on eco- We are a founding partner of the Organic also an important year in the initiative’s preferred cotton (for H&M group this system services like pollination, water Cotton Accelerator (OCA) and are an strategy formation for long-term farmer consists of better cotton, organic and 100% LEADING THE CHANGE cleansing and carbon sequestration that active member of the board. The OCA was capacity building and sustainable sourcing. recycled cotton), and the second biggest forests, wetlands and other natural sys- user of recycled and organic cotton, tems provide. It is therefore critical that according to The Textile Exchange’s the sourcing of our raw materials is done 4.2. SUSTAINABLE COTTON 4.3. BREAKDOWN OF Preferred Fiber & Materials Market in a responsible way that respects people, IN % OF TOTAL COTTON USE SUSTAINABLE COTTON SOURCES Report 2018. animals and the environment by protecting and enhancing human rights, natural 100% • In autumn of 2018, Monki reached its systems and biodiversity. We also aim to GOAL 2020 goal to source 100% of its cotton prod- source materials that have the potential

ucts sustainably. Monki’s sustainably- & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% 0.3% to be used as closed-loop materials. This sourced cotton includes organic cotton, means they can be recycled or regener- recycled cotton and Better Cotton ated, making them typically less pollut- sourced through the Better Cotton Ini- ing than other materials. 95% RECYCLED COTTON tiative. Cheap Monday has also reached their goal to use 100% sustainably BETTER COTTON In 2018, H&M group joined sourced cotton, in their case, meaning EFFECTIVE, a multi-national research ORGANIC COTTON organic or recycled cotton during 2018. project with a focus on developing bio- 0.2% As for Weekday, all cotton in their denim based polyamide (nylon) fibres to make 79.9% and basics range is recycled or organic. recyclable textile products. The project is & EQUAL FAIR 100% funded by the EU and its partners*. 59% • We joined the EU project EFFECTIVE, 0.1% with a focus on developing 100% bio- 47% based and recyclable nylon. 0.2% 43% 28.3%

34% STANDARDS & POLICIES 0.1% 19.6% 22% 9.7% 14.5% 14.6% 12.4% 13.9% 12.1%

* This project has received funding from the Bio-Based Industries Joint Undertaking (JU) under grant agreement No 792195. The JU receives support from the European Union’s Horizon 2020 research and innovation

programme and the Bio-Based Industries REPORT WE HOW Consortium. 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

An independent assurance statement related to GRI 301-1 is provided on page 106.

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WOOD-BASED MATERIALS PROGRESS fibres sourced from ancient or endan- VISION & STRATEGY H&M group depends on forests for many • According to the Textile Exchange’s gered forests and other controversial of our materials, including solid wood, Preferred Fiber & Materials Market Report sources, and to replace them with sus- man-made cellulosic (MMC) fibres, paper 2018, H&M group was the biggest user of tainably sourced alternatives. H&M group and board material. Forests make up preferred MMC fibres and the biggest user is one of the founding members of the some of the world’s largest and most of preferred Lyocell. CanopyStyle Leader for Forest Conserva- important ecosystems; tropical rain tion and has been actively working with • We released the updated version of the CanopyStyle initiative since 2014. forests cover less than 10% of the planet’s 100% LEADING THE CHANGE surface yet contain at least two-thirds of our man-made cellulosic sourcing policy This initiative is working to eliminate its biodiversity. in 2018. sourcing from ancient and endangered forests, as well as closing the loop for tex- However, forests are rapidly being • H&M group is committed to the Changing tiles and supporting the development of destroyed through illegal (or badly Markets Roadmap for responsible viscose alternative MMC fibres made from more managed) logging and unsustainable and modal fibre manufacturing. The objec- innovative sources, such as agricultural land conversion. Responsible sourcing tive of the roadmap is for viscose and modal residues and recycled textiles. policies promote sustainable forest producers to move towards a closed-loop management practices and help combat manufacturing system. By 2025 H&M group In our MMC sourcing policy (updated & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% illegal logging and deforestation. We will only use viscose and other man-made end of 2018), we commit that by the end commit to not source wood and forest cellulosic fibre producers with good of 2020, 100% of our man-made cellu- materials from: environmental practices that align with the losic fibres will be sourced from low risk roadmap, such as closed-loop processing suppliers that have completed Canopy- • Forests with threatened high of water and chemicals. We are working to Style audits and attained a “green shirt” conservation values (HCV) reduce the chemical intensity of viscose in H&M Home. in the Hot button report*. This means partnership with the Zero Discharge of Haz- they will indicate a low risk of sourcing • Forest areas that have been illegally ardous Chemicals (ZDHC) initiative. Please from ancient and endangered forests. By harvested read more about this work in the chemical MAN-MADE CELLULOSIC FIBRES the end of 2025, all H&M group MMC 100% FAIR & EQUAL FAIR 100% management section on page 42. (VISCOSE, RAYON, LYOCELL) fibres will come from either FSC certified • Natural forests cleared for Man-made cellulosic (MMC) fibres are forests or from other, more sustainable plantations or other use • H&M group is one of the investors in one of the world’s biggest group of fibres, and innovative sources, such as agricul- TreeToTextile, a Swedish innovation com- and an important material group for us as tural residues or post-consumer textiles. • Forest areas where traditional pany that is working with new technologies well. MMC fibres include viscose, lyocell or civil rights have been violated that use wood pulp to make textile fibres in and modal, and are made by dissolving WOOL

an environmentally friendly way. pulp, which today is mainly produced Although wool represents a small share STANDARDS & POLICIES We aim to exclude the above by increas- from wood. However, since the world’s of our total material use, it is still an ing our use of FSC (Forest Stewardship • H&M group has contributed to the devel- forests face challenges such as forest important fibre and has benefits that Council) certified materials, and by opment of ForestMapper, a new public depletion and deforestation, H&M group are currently hard to replace. Our goal increasing our use of alternative fibre interactive tool that identifies ancient and has engaged with others to push this is that, by 2022, we will only source our sources, such as agricultural residues endangered forests. ForestMapper was industry in a more sustainable direction. virgin wool from farms certified to the and post-consumer textiles. These can developed to support the marketplace in Responsible Wool Standard (RWS). work as replacements for wood fibre in, making responsible sourcing decisions. We are collaborating with the not-for- You can take a trip through the world’s profit group Canopy and more than 160 *The Hot Button Report is a tool that enables brands and REPORT WE HOW for example, man-made cellulosic materi- retailers to assess producers’ impact on the world’s forests, forests here. other brands to eliminate the use of MMC as well as their leadership in finding solutions to eliminate als and paper. endangered forest fibre from their supply chain.

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This will ensure we only source wool ARKET, one of the first brands We have teamed up with other brands and fibres from farms that respect animals in the world to introduce organisations to work together for a more VISION & STRATEGY Responsible Wool Standard and the environment. in their collection. sustainable leather supply chain. This includes working with the Responsible PROGRESS Leather Roundtable, driven by the Textile • 100% of our tier 1, 2 and 3 suppliers Exchange, the Leather Working Group have been briefed on the new RWS. and its sub-group on animal welfare. 100% LEADING THE CHANGE • ARKET became one of the first brands We are systematically working to inte- in the world to introduce the Responsible grate tanneries into our social and envi- Wool Standard in their collection. ronmental sustainability assessments. During 2018 we have further reinforced LEARNINGS our sustainability commitment for • Industry challenges and lack of trace leather products, putting the focus on ability and transparency in the mohair chrome-free solutions for the coming supply chain made us act decisively. PETA years. By 2025, all our animal-based revealed systematic animal abuse in the leather will be chrome-free and originate & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% mohair industry in May 2018. We stopped from more sustainable sources. buying products containing mohair in mid- 2018 and by 2020, we will have phased However, because leather has so many sus- out mohair completely. tainability challenges – from farm level up to finished product – we are also focused • While cashmere is popular for its soft on finding more sustainable non-animal texture and known as a high-quality mate- leather alternatives made using plants and rial, it comes with both environmental and other bio-based materials. We are increas- animal welfare challenges. As part of our ingly optimistic about the potential of 100% FAIR & EQUAL FAIR 100% 2030 goal to only use sustainably sourced these innovative alternatives. materials, we have decided to gradually phase out conventional cashmere and OTHER SUSTAINABLY SOURCED replace it with more sustainable options MATERIALS with similar high value for our customers. All the virgin down we use in our products comes from farms certified to the

LEATHER Responsible Down Standard (RDS). In STANDARDS & POLICIES We are continuously working towards 2018, we also introduced recycled down a more transparent leather supply and feathers into our products, which chain. Even though leather stands for a is collected from post-consumer goods. very small fraction of our total material According to the Textile Exchange’s use, we want all the animal-derived 2018 Preferred Fiber Market Report, leather we use to come from sources H&M group is the world’s largest user we know are proactively addressing of preferred down, which includes both their environmental, social and animal RDS certified, and post-consumer REPORT WE HOW welfare impacts. recycled down.

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C. Sustainable production VISION & STRATEGY 100% LEADING THE CHANGE

Sustainable production hazard-based scoring system to rate chemi- processes are central cals and formulations based on human health and environmental toxicity, and automatically to circular systems. In designs hazardous substances out. This is a the fashion and design prerequisite for circular economy. industry, we rely on water and We have also re-launched a Positive List chemicals in most of our production of chemicals that we promote throughout & RENEWABLE CIRCULAR 100% processes. To achieve sustainable our supply chain. This Positive List will be included in the Zero Discharge of Hazard- production and our larger 100% ous Chemical (ZDHC) Gateway, as a web-based Circular & Renewable ambition, industry platform to choose the best chemicals. We are working to align all the tools and we must address our chemical and standards within the fashion industry, which water management, and tackle the will help achieve our goal of zero discharge. microfibre challenge that comes from By 2030, all products on our Positive List

should be assessed by their hazard to secure & EQUAL FAIR 100% using synthetic fibres. our vision for a toxic-free fashion future.

CHEMICAL MANAGEMENT We have continued to work alongside other To ensure the safe use and reuse of materials brands and stakeholders on the ZDHC pro- in the circular system, we must ensure good gramme, raising awareness and developing chemical management. Our vision is to lead the shared industry standards and tools. change towards safe products and a toxic-free STANDARDS & POLICIES fashion future. Using recycled materials is a key element in the circular economy. However, increasing In 2018, we started the process to adopt the use of recycled materials while staying Screened Chemistry to enable us to select the toxic-free presents a challenge. We have there- best available chemicals for our production. fore initiated mapping of textile waste streams Screened Chemistry goes beyond Restricted and assessing chemicals. In this way, we can Substance List /Manufacturing Restricted Sub- make sure that textiles containing hazardous HOW WE REPORT WE HOW stance List chemicals and identifies best-in-class substances are not allowed to re-enter the pro- chemicals and safer alternatives. It includes a duction cycle. Photo credit: Sohail Na.

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PROGRESS • We adopted Screened Chemistry as VISION & STRATEGY a method to choose the best available Chemical management roadmap chemicals. Currently we have 5,300 chemical products on our positive list and 53 chemical suppliers who apply WORKING AREAS LONG-TERM GOALS & AMBITIONS Screened Chemistry, and we are actively expanding this list by working 100% LEADING THE CHANGE closely with the chemical industry. Traceability 100% traceability of input chemicals by 2030. To further promote and develop Screened Chemistry we hosted an industry dialogue sharing our chemi- Leading the Push legislation and support public policies promoting progressive Engagement cal vision and roadmap. Change chemical management. Push for higher ambition levels within the industry. • 272 of our suppliers participated in wastewater testing using ZDHC Transparency Share information with customers, right-to-know principle. Full public disclosure on wastewater discharge test data.

wastewater guidelines and the results & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% are published in the ZDHC Gateway.

• The Environmental Emissions Eval- uator (a tool to help suppliers assess and improve their chemical usage and discharge) is now being used by Best Safe Identify and promote better chemicals/technology to enable use 204 of our suppliers (49 suppliers in Available Products of best available chemistries in supply chain. 2017) in China, Bangladesh, Pakistan, Chemistries Cambodia, Vietnam, India, Turkey, and Indonesia. & EQUAL FAIR 100%

• We participated in Re-Tex, a project within the CE100, where mechanically recycled cotton was tested for No discharge of hazardous chemicals in the supply chain; factories apply restricted substances. We will further Zero Discharge 100% best chemical management practice and better chemistries/processes without any impact of harmful chemicals on environment or health. evaluate and continue testing recy- STANDARDS & POLICIES cled materials in collaboration with other brands. Enable the circular goal to use 100% recycled or other sustainably Toxic 100% Circular Free sourced materials by 2030, from the chemical perspective (materials and processes). • Together with ChemSec we published a joint letter to push for stricter Clean factories. legislation of recycled materials and to Cooperation Drive common practice in the development of industry standards, put pressure on suppliers to increase systems and tools.

chemical transparency and use of REPORT WE HOW safer alternatives.

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Water management VISION & STRATEGY In 2018, a report on SDG 6 Clean Water and Sanitation Our 5-step water stewardship strategy stated, “the world is not on track to achieve the global SDG 6 targets by 2030 at the current rate of progress”. With 2.3 billion people lacking basic sanitation services, along with worsening worldwide water pollution, we are resolved to push harder for action and progress on this 1. WATER AWARENESS 4. STAKEHOLDER ENGAGEMENT 100% LEADING THE CHANGE issue, both within our value chain and beyond. Building water awareness at our Increased focus on collective action company, at our suppliers’ facto- with other companies, governments H&M group has been working to reduce water impacts ries and amongst our customers and NGOs in multi-stakeholder to ensure high level understanding platforms to address water issues throughout our value chain for over ten years. We began a of the global water challenges and in specific focus regions. long-term partnership with WWF in 2011, with the goal of their dependence on freshwater. becoming a leading water steward within the fashion indus- 5. INFLUENCE GOVERNMENTS try. With the help of WWF, we developed a five-step water 2. KNOWLEDGE OF IMPACT Increased focus on government stewardship strategy. Measuring water impact and risk influence by engaging with public

within our stores, warehouses and policymakers to manage water & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% During World Water Week in 2018, H&M group and suppliers’ factories. basins in a sustainable way. WWF called for action from the textile and apparel industry to join forces with stakeholders, governments, 3. INTERNAL ACTION development partners, wider industry and water users Improving the use of water within to find solutions to today’s water-related challenges in our stores, warehouses and our basins where we operate. suppliers’ factories.

OUR WATER STEWARDSHIP STRATEGY H&M group’s water stewardship strategy takes an innovative and integrated approach, going beyond factory lines to & EQUAL FAIR 100% address large scale, local, environmental and social impacts across our whole supply chain.

In 2018, we revised our Water Management requirements for suppliers. This meant raising the bar for functional efflu-

ent treatment plants and requiring the measurement and STANDARDS & POLICIES tracking of water streams for efficiency and benchmarking. HOW WE REPORT WE HOW

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Water roadmap for supply chain VISION & STRATEGY Water roadmap 2018–2022 As part of our water stewardship strategy, in 2018 we launched our new Water roadmap for our supply chain, which contains our key goals and actions up until 2022. It addresses the water-related challenges we face around the world in a way that puts our WATER WATER WATER industry, and others, on the right path to SDG6, to QUANTITY QUALITY CIRCULARITY 100% LEADING THE CHANGE “ensure availability and sustainable management of FOCUS water and sanitation for all”. Reduction of production 100% Effluent Treatment 15% of water will water usage by 25% in Plant (ETP) functionality be recycled comparison to baseline assessments to achieve out of total The roadmap represents a paradigm-shifting move of 2017 for tier 1 and green grading production water towards integrated water management that values tier 2 (l/kg, l/pc, l/m) consumption water as a shared resource. For example, we set an GOAL 100% ETP discharged ambitious goal to recycle 15% of wastewater back Maximize the use of rain water quality are ZDHC 5% of discharge into production processes by 2022. We have started water harvesting where wastewater compliant– wastewater will be reused to use five new water recycling solutions for tex- feasible Foundation Level within the facility & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% tile and apparel production processes, which will improve the quality and create opportunities for water recycling in many of our production countries.

H&M group operates in many medium-to-high risk Our vision is to have a positive impact on water water basins where challenges vary from water in our value chain by stewardship actions. scarcity to water pollution. We have assessed the risk of our suppliers’ production facilities with the WWF Water Risk Filter and integrated the necessary actions and goals in our roadmap. We have also & EQUAL FAIR 100% aligned our ambition with SAC/Higg FEM3.0, which we will use to measure the water sustainability per- COLLECTIVE COMMUNICATION formance of our suppliers’ facilities. ACTION FOCUS

Build and enhance relationships 100% H&M group PO staff to

in two prioritized driver basins receive basic water education STANDARDS & POLICIES stakeholders via e-learning

GOAL Progressive support for Raise supplier awareness on science-based target water-related risks, mitigation for water and efficiency measures HOW WE REPORT WE HOW

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PROGRESS • 30.8% of our denim products have • We have assessed all onsite industrial Efflu- achieved a green level EIM (Environmental VISION & STRATEGY ent Treatment Plants (ETP) in our value chain Impact Measurement), which means they and worked with our suppliers to secure used a maximum of 35 litres of water per appropriate technology, operational control garment during the treatment processes. and high levels of relevant competence. We now have 93% functional ETPs in our • We have installed water-efficient equip- supply chain. ment in 64% of our own stores, offices and 100% LEADING THE CHANGE distribution centres. Our goal is to install • Our current rate of compliance with ZDHC water-efficient equipment across all our wastewater standard for conventional operations by 2020. parameters is 87%. • Our partnership with WWF contributed • We trained all our tier 1 and tier 2 facilities to bringing in more global fashion brands on Higg FEM 3.0. This supported them in to the WWF water stewardship program making self-assessment of their environ- in Taihu, China. The first standardized

mental performance. We also rolled out our supplier training material was digitized & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% Towards Circular & Renewable training for and implemented for suppliers in autumn facilities, which includes capacity building 2018. on cleaner production with a focus on water, energy and chemicals. LEARNINGS • In many countries where we operate, • Our work with resource efficiency and water is not considered as a valuable, natural cleaner production programmes has resource. This lowers awareness and creates continued to help our suppliers to reduce a perception that water is dispensable. We their water consumption. In 2018 our efforts are supporting the Bangladesh govern- projected water consumption reduction by ment’s Water Valuation Study to develop an & EQUAL FAIR 100% 4.7 million m3. operational shadow price for water, so its value can be considered in policy, projects • We also encourage our suppliers to use a and investment decisions in the public and rain water harvesting system to efficiently private sector. capture, store and use natural water sources

whenever feasible. In 2018, our partner • Many countries lack the required innova- STANDARDS & POLICIES Hamza Textiles Ltd in Bangladesh harvested tion to provide solutions for reducing water 18.9 million litres of rain water. consumption. Processes for washing and dyeing textiles still depend on water as a • We have further improved our understanding carrier, and often require huge volumes of of where the water in our supply chain comes water. Newer technology and innovation can from. 38% of water comes from the ground, significantly reduce water usage in textile • Most existing water management plat- water management means there are both 5% from surface water, 52% from municipal processing. We are exploring new recycling forms work in silos, making it much more gaps and overlaps. If we could join forces, water, 5% from Produce /Process Water. (Self techniques for textile processes with more challenging to reach common industry goals. it would help us align and use available REPORT WE HOW reported data Higg FEM 3.0 in 2018). efficient water consumption. The many organisations working to improve resources more effectively.

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Promoting cleaner VISION & STRATEGY production in the Büyük Menderes basin

Water facilities often require 100% LEADING THE CHANGE financial support to adopt cleaner production processes. In many basins where we operate, such financial mechanisms are either absent or not pro- moted. Providing easy access to finance increases resource efficiency and maximises profit Photo credit: Charlotta Järnmark/WWF.

for the facility. Between 2017 & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% and 2018, we worked with WWF to promote cleaner production Healthy rivers and freshwater ecosys- in the Büyük Menderes river basin in Turkey. This involved “tems are central to achieving the Sus- engaging relevant ministries and industrial bodies, as well tainable Development Goals. WWF’s as contributing with training partnership with H&M group has set programmes, feasibility studies, favourable financing programmes ambitious targets on water steward- 100% FAIR & EQUAL FAIR 100% and knowledge-boosting activities for programme partici- ship, reducing supply chain water pants. Through this project, we impacts, supporting collective action are facilitating financing options for the textile facility so they can and strengthening water governance adopt cleaner production tech-

niques in their production. in key regions – targets which will help STANDARDS & POLICIES In May 2018, several major Photo credit: Cenk Oruç. to restore and protect rivers and fresh brands emphasised the importance of cleaner production water ecosystems for the benefit of to their global supply chains “We will continue our work in the will also join us, which is excel- at a textile engagement event. Büyük Menderes region and scale lent. We feel that we are gaining people, business and nature. This was followed by a Cleaner to the heart of the textile indus- momentum”. says Julia Bakutis, ” Production Guideline launch in try in Turkey, the Ergene region, Sustainability Manager, H&M STUART ORR, September 2018. during 2019. Other companies group Europe. WWF PRACTICE LEAD, REPORT WE HOW FRESHWATER

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KEY FACTS & FIGURES 2018 / KPIS AND GOALS / 100% CIRCULAR & RENEWABLE EXPLAINED / BECOMING CLIMATE POSITIVE VISION & STRATEGY Microfibres work overview

DESIGN PRODUCTION SALES USE END OF USE 100% LEADING THE CHANGE

RISK Construct yarns Map and prioritise Offer laundry bags Standardise Develop MITIGATION and fabrics to contributing processes for minimising test method technologies minimise microfibre and programmes to shedding Identify and implement emissions Set shedding enable reuse and actions to stop microfibre during wash requirements recycling Support the emissions development Offer repair Support of alternative Engage stakeholders to service development of materials scale actions laundry machine filter systems 100% CIRCULAR & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100%

RISE/MinShed Currently Our RISE/ Our textile collection project, exploring Take Care MinShed programme with our H&M Sport. PARTNER / Bilateral options Concept project, partner I:CO PROGRAMME actions Bilateral actions Investing in and MICROFIBRES supporting recycling technology When synthetic fabrics like polyester, nylon and acrylic development are washed, they release microfibres into the water system, which disturbs natural ecosystems. Each year, approximately 500,000 tonnes of microfibres – the & EQUAL FAIR 100% equivalent of 50 billion plastic bottles – enter the ocean PROGRESS • We are developing a research pro- kets. Microfibre-reducing laundry as a result of clothes-washing.* • We joined the Swedish research gramme to create a better under- bags aim to prevent the release of group RISE in their project MinShed, standing of how and where to best microfibres into the water system H&M group is highly concerned about the environmental which aims to find methods of reduce microfibre emissions in tex- during the wash. We recognize this impact of microfibres and is engaged in driving research designing clothes with minimized tile production. The purpose of this is a short term solution, and more and contributing to a global solution, together with many microfibre shedding. Testing and programme is to study microplastics robust system solutions must be STANDARDS & POLICIES others in the fashion and design industry. The issue evaluation of fabrics to find param- generation and management in the developed for the long term. of microfibres needs to be addressed at several stages eters that affect the shedding textile production processes. throughout the value chain, including design, produc- behavior is currently in progress. This covers polyester, recycled poly- • We are closely monitoring the tion, usage and end-of-life. We are also investigating our Through MinShed, we also support ester, nylon, and acrylic. development of alternative bio-de- own synthetic textiles to see how the fibre composition an investigation to understand gradable fibres that potentially could sheds during the washing process. This way, we will be how and if washing machines can • We have added laundry bags that be used as alternatives for today’s able to see if we can make any adjustments in the making be equipped with filters to reduce specialize in filtering microfibres to synthetic fibres.

of the fibres to reduce the shedding. REPORT WE HOW microfibre emissions. Read more the assortment and are rolling this *A New Textiles Economy: Redesigning Fashion’sFuture by Ellen MacArthur about MinShed here. initiative out to more and more mar- Foundation & CFI page 39.

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D. Product use VISION & STRATEGY 100% LEADING THE CHANGE

Circular products stay in use as long as possible before they are recycled. For most Take Care concept expands to more markets

products, a major part of the lifespan is with Our Take Care concept inspires and reflecting their brand don’t know how. With Take their owner. We have a responsibility to and enables our customers in identity. Together we can Care, we can offer them ensure we create long-lasting products and that we help caring for their fashion favourites make fashion last longer. guidance and provide the – from the moment they leave the services and products to our customers keep them for longer. store with their new clothes up “Many customers want to make it happen”, says Johan & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% to the time they bring them back take care of their favourite Lindström, Take Care Group We can prolong the lifespan of our reduce the environmental impact for reuse and recycling. Because wardrobe pieces, but often Manager at H&M. products and create a truly circular of our products after they leave 21% of the climate impact in a system by designing durable prod- our store, as well as increasing garment’s life occurs after it has ucts and empowering our custom- their overall lifespan. left the store, we want to help ers to care for and use the products our customers keep their clothes in a sustainable way. Now we have taken further steps fresh and prolong their life. The to create more products with Take Care concept does this by CUSTOMER USE emotional durability through

offering guidance and hands-on & EQUAL FAIR 100% We encourage our customers to H&M’s Take Care concept, Mon- support for smart repairs and make sustainable choices while ki’s Re:Love event and Weekday’s easy modifications. We also offer using our products. We do this by in-store workshop. Read more on a range of products to support providing information about gar- these initiatives on page 51. this behaviour change, including ment care, encouraging custom- eco-friendly detergents, sewing ers to use products for as long as PROGRESS kits, deco-patches and innovative possible and offering opportuni- • After the initial pilot project in washing bags that collect micro STANDARDS & POLICIES ties for reuse and recycling, rather Germany we launched the Take fibres, to mention a few. than disposal. For many years, our Care concept in several markets garments have had the Clevercare including France, UK, Sweden, During 2019 we will roll out the label included in their washing and Norway. Take Care concept to more mar- instructions. This encourages kets. Several brands in the H&M washing at lower temperatures group have ongoing initiatives and hang drying instead of tum- similar to the Take Care concept, HOW WE REPORT WE HOW ble drying. Simple behavioural personalized to their customers H&M. changes like this can dramatically

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E. Product reuse & recycling VISION & STRATEGY 100% LEADING THE CHANGE

At H&M group, we work We collaborate with I:CO (a global 4.4. TONNES OF GARMENTS COLLECTED IN H&M GROUP STORES hard to increase the partner for collection, reuse and recycling of used textiles and shoes) to run 20,649 number of our products our garment collecting scheme. I:CO that are reused or recycled. and their partners sort all collected textile and shoes according to the 17,771 We run renewal and remake projects, EU Waste Hierarchy which promotes 15,888 turning old clothes into new fashion reuse before recycling. & RENEWABLE CIRCULAR 100% favourites through reprinting, re- About 50–60%* of the textiles are 12,341 purposing and remaking. sorted for re-wear or reuse: wearable We also continue to collect unwanted pieces are kept in their current condition and marketed as second hand 7,684 clothes and home textiles from our garments. Some are even used to create customers through our garment new products in both regular and special collections for H&M group brands. collection initiatives. In 2016, H&M 100% FAIR & EQUAL FAIR 100% brand set a goal to collect 25,000 About 35–45%* of the textiles are 2014 2015 2016 2017 2018 recycled to become products for other Used clothing and shoes are sorted for reuse tonnes of unwanted clothes annually and recycling at I:CO’s partner facility plants. Please find an independent assurance statement related to our industries or made into new textile Photo credit: I:CO/SOEX. tonnes of garment collected for reuse and recycling on page 106. by 2020. In 2018, we collected over fibres. For example, some textiles are 20,649 tonnes. used to make cleaning cloths. Other into new textile fibres and yarns We are constantly working to textiles are mechanically shredded for our closed loop collections. This increase the share of textile-to-

We started collecting unwanted textiles (from any into fibres and used to make insula- is something we want to change textile recycled materials in our STANDARDS & POLICIES brand, in any condition) in H&M stores in 2012 in tion materials or painters’ drop cloths. and dramatically increase through products. As new recycling technol- Switzerland, rolling out the initiative globally in During this process, buttons and investing and engaging in solutions ogies become available at scale, we 2013. We also offer the service in all & Other Stories, other hard materials are sorted out. for scalable recycling technologies will be able to create more prod- Monki and selected Weekday stores. & Other Stories Even the dust, which is left over from available for all types of textile fibres ucts from the post-consumer waste also offers instore collection and recycling of beauty shredding is kept and used for felt and blends. The remaining 3–7%* we collect via our garment collect- product containers. Our new brand Afound offers board production. that can’t be reused or recycled are ing scheme. This will help us reach collection service not only for garments, but also used as combustibles for energy pro- our goal to use only 100% recycled shoes. A still rather small share of the duction. Sending textiles to landfill or other sustainably sourced mate- REPORT WE HOW

*Sorting results vary due to geographical and seasonal changes. recyclable textiles is also recycled is not an option. rials by 2030.

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Product re-use and on-demand production VISION & STRATEGY

MONKI recently teamed up longer in their wardrobes and be with the University of Borås on worn more frequently. Weekday’s Re:Textile, a project that finds experiment has proved success- new ways for fashion to be kinder ful: customers become more

to the environment. The brand interested in how products are 100% LEADING THE CHANGE hosted a two-day Re:Love event in made and are eager to be part of Gothenburg and Stockholm. Cus- new experiences, like printing in tomers were invited to bring old store and on-demand production. Weekday. clothes or find new Monki favour- This initiative has resulted in per- ites. Over half of those attending manent printing services in one of brought old Monki favourites and Weekday’s stores in Stockholm. customised them for free with graphics, stickers and prints. CHEAP MONDAY launched their

yearly C/O collection for AW18, & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% Cheap Monday. WEEKDAY launched the Week- which in this capsule creates new day Workshop in August 2018, a products by upcycling workwear. mini manufacturing hub inside the The collection consists of jackets, store in Stockholm. Customers work chinos, t-shirts, sweats and were offered production on- a shopper bag, all made from demand of local trends, testing discarded workwear with that new designs before producing sought-after worn look. The pro- in bulk, and replenishing stock ject aims to shift the context from on the fly – all in all reducing the workwear to fashion, rescuing the 100% FAIR & EQUAL FAIR 100% amount of unsold products and value of pieces that have become increasing accuracy to demand. worthless for their primary The workshop also invited purpose. By saving old, quality Weekday customers to co-create garments from going to waste, the products with prints to their liking. collection is saving virgin mate After the success of the work- rials, carbon emissions, water and

shop, Weekday is scaling up to chemical use. STANDARDS & POLICIES nearshore facilities that make use of new printing, embroidery and The project was initiated by custom fit technologies, all part of Cheap Monday together with a circular production innovation Re:Textile, a project within Sci- plan. We’ve seen in research, if a ence Park Borås in Sweden that customer is part of the process of focuses on developing structures creating their product, it is more for circular processes and re HOW WE REPORT WE HOW Monki. Cheap Monday. likely that the product will last design in the textile industry.

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PROGRESS FAULTY PRODUCTS However, if they occur, we follow a strict ban PROGRESS • With our newly created brand Afound, Waste, particularly product waste, is on landfill. Due to lack of solutions and to • 0.453% of our total product assort- VISION & STRATEGY we use a new business model that gives an emerging topic in our industry. We keep the risk of circulating unsafe materi- ment was reused (including charity unsold fashion new life by selling overstock, believe one product going to waste is one als to an absolute minimum, such products donations) or recycled due to the both from H&M group brands as well as too many, whether that’s after customer unfortunately have to be destroyed (prioritiz- products being faulty. over 100 external brands. use or before. We have a strict policy in ing incineration for energy recovery where place that prohibits the destruction of possible). • 0.052% of our total product assort- any products that could be sold, used ment was destroyed due to the prod-

• We collected 20,649 tonnes of garments 100% LEADING THE CHANGE through our garment collecting initiatives. or recycled. We naturally want to avoid STORE & DISTRIBUTION CENTRE WASTE ucts having failed certain chemical This is an increase of 16% from last year, any overstock; it’s in our interest to sell We focus on managing the most common tests, were contaminated by mould, meaning we have achieved our 2018 goal. everything we produce. We put a lot forms of waste within our stores and distri- for example, during transportation, or of time and effort into forecasting the bution centres (DCs) – cardboard, plastic and when there was no viable recycling or LEARNING demand of our customers as accurately as paper. These materials are usually collected downcycling solution available. • Mechanical recycling techniques are possible, which involves using advanced in our stores and then sent to our local DC advancing, but are restricted as to which AI tools. If we plan incorrectly, we will facilities for recycling. We occasionally face • This year, the share of stores with fibres they can be used for and how the discount a product and sell it, but we will a challenge when a country or region does recycling systems is 63%.

fibres are affected by the process. We know never destroy it. not have the necessary recycling systems & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% it takes time for new recycling techno available. In 2018, the share of stores that • We recycled 92% of waste originat- logies to scale and are therefore involved in We also apply very strict quality require- had enough recycling systems for our waste ing at our DCs and waste delivered to research projects such as DEMETO and H&M ments to all our products. If, despite equated to 63%. This indicates a decrease our DCs from our stores (2017: 93%). Foundation’s Hong Kong Research Institute preventive measures, a product is made from last year’s result (2017: 64%), which can of Textiles and Apparel (HKRITA), to support that does not meet these quality require- be attributed to improved data collection. • In 2018, we launched the Sustainable breakthroughs and make solutions more ments, we have a responsibility not to sell Workplace Standard and plan to roll it mainstream. Through H&M group’s invest- it. When this happens, we either give the In 2018, 92% of waste originating in our DCs out to all our offices, distribution cen- ments in Worn Again, Re:newcell and Moral product to charity or recycle it. The same and waste delivered to our DCs from stores tres and stores worldwide during 2019. Fiber, we also speed up the acceleration of goes for samples or any damaged or faulty was recycled compared to 93% in 2017. Our recycling technologies available at scale. products returned to us by our customers. aim is to recycle 100% of the waste collected & EQUAL FAIR 100% There are very rare instances in which a in all our stores and 95% of waste originating WASTE MANAGEMENT WITHIN product cannot be sold, given to charities or delivered to our DCs. OUR OWN OPERATIONS or recycled. This is the case if a product To make sure we operate in a truly circu- has failed certain chemical tests, has been PRODUCTION WASTE lar way, we always aim to reuse or recy- contaminated by mould, for example, In 2018, H&M group started developing a cle the waste generated within our own during transportation or when there is no strategy that focuses on the management of STANDARDS & POLICIES operations. During 2018, we rolled out viable recycling or downcycling solution waste generated by our group’s supplier fac- Sustainable Workplace Standard (SWS). available. In those rare cases the product tories. Over the next two years, we aim to set SWS is our commitment to create the best unfortunately can’t be reused, donated to goals and roadmaps that will help in man- possible sustainable working environment charities or recycled. aging the waste resources through reduc- in our offices, distribution centres and tion, reuse and recycling. In 2019, we will stores, such as waste management and We work preventively to minimize any focus on waste sources and waste disposal, recycling. The other categories within such instances wherever possible and to and continue to evaluate options for waste waste management are faulty products accelerate new recycling technologies that recovery in the different production markets REPORT WE HOW and store and distribution centre waste. can handle these challenges. we operate.

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Becoming climate positive VISION & STRATEGY 100% LEADING THE CHANGE

Becoming circular and climate positive are closely linked. Climate positive value chain by 2040

Climate change remains one Climate Climate positive Climate negative neutral of the greatest challenges of our time. Its consequences Decrease emissions will affect our entire planet & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% and everyone living on it. Increase carbon sinks To tackle the challenge of climate change, we need to Total Strengthen climate resilience value chain Reduce Use renewable and Unavoidable to a larger extent than what collaborate across sectors. emissions energy needs sustainable energy emissions our unavoidable emissions For example, by creating burden the climate energy-efficient products and

1. 2. 3. & EQUAL FAIR 100% services, sustainable and LEADERSHIP IN 100% RENEWABLE CLIMATE RESILIENCE innovative material use, and ENERGY EFFICIENCY ENERGY AND CARBON SINKS improvements in supply chains.

We at H&M group are determined to 1.5°C of warming to avoid the worst yet have all the solutions we will need to • Priority 2 tackles our 100% renewable take the lead in tackling the challenge of impacts of climate change and called for achieve this goal, but the urgency of immi- energy goal, which will help us to ensure STANDARDS & POLICIES climate change. That means going way all sectors to hasten the transition to nent climate change means we must start the energy sourced by H&M group and our beyond simply cutting our emissions, climate neutral or positive operations. taking bold, decisive action now. Together supply chain is renewable. committing instead to make a significant with the help of expert scientific organisa- contribution to help our planet stay below We have set an ambitious goal to become tions and the WWF Climate Savers, we have • Priority 3 targets climate resilience and the 2°C global warming limit as set by the climate positive by 2040, which includes identified three key priorities for action. carbon sinks to address unavoidable Paris Climate Agreement. In addition, a everything from raw materials to the emissions and emissions beyond what our recent landmark report by the UN Inter- consumers’ use of our products. It means • Priority 1 focuses on leadership in energy value chain is responsible for. These three governmental Panel on Climate Change removing more emissions from the atmos- efficiency to enable us to use as little priorities relate to both our own opera- REPORT WE HOW (IPCC) described how we must stay below phere than our value chain emits. We don’t energy as possible. tions and those across our value chain.

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OUR KEY COMMITMENTS Besides the efforts across our value chain to reach Our emissions throughout our value chain (scope 1 + 2 and 3) VISION & STRATEGY our climate positive goals, we are also engaging with other actors within the industry and beyond in driv- 4.5. TOTAL CO2e EMISSIONS IN TONNES 4.6. TOTAL SCOPE 3 ing policy change, by adopting science-based targets (SCOPE 1 + 2) INCL. RENEWABLES* CO2e EMISSIONS*: 18,215KT and committing to global climate reduction goals: 341,675 10,723 9% SCOPE 1 RAW MATERIALS** As testament to H&M group’s leadership, and SBTs 100% LEADING THE CHANGE SCOPE 2 7% as an important milestone on the journey towards GOODS NON- becoming climate positive by 2040, our science- GARMENT** based targets aligned with the Paris agreement have been approved by the Science Based Targets 11% initiative (SBTi). H&M group commits to reduce GARMENT 46% absolute GHG emissions 40% in our own operations 151,753 MANUFACTURING** FABRIC

(scope 1 + 2) by 2030. H&M group also commits to 330,952 9,308 PRODUCTION** reduce scope 3 GHG emissions from raw materials, 20% fabric production and garment manufacturing 59% & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% 80,541 USE OF SOLD per product by 2030. Both targets are set against a 10,376 63,690 56,978 PRODUCTS 1%***

142,445 12,484 2017 baseline. 11,818 1% 3%

70,165 2% 51,206 TCFD H&M group has publicly endorsed the Task 45,160 UPSTREAM END-OF-LIFE OTHER force on Climate Related Disclosure (TCFD) and TRANSPORT OF SOLD EXPENDITURES** aims to comply with its recommendations. We are in PRODUCTS the process of analysing our climate risks according 2014 2015 2016 2017 2018 to the TCDF guidelines and will follow the recom- *Our GHG emissions accounting and reporting is aligned with the GHG protocol. *Climate impacts are based on a scope 3 assessment done by Ecofys in 2017, based Scope 2 emissions under the market-based approach is equal to 45,160 tonnes on 2016 data. The categories are based on GHG Protocol. Calculations in the footprint mendations for disclosure. CO2e. Under the location-based approach (using grid average emission factors), analysis are based on calculations on a combination of high-quality H&M group comparable to emission figures in our 2013, 2015, 2016 and 2017 reports, data combined with the best available public data sources on CO2 emissions, using & EQUAL FAIR 100% scope 2 emissions were 662,739 tonnes. For further details and data, please conservative assumptions. We are working to further improve the calculations by using UNFCCC We are a signatory of the Fashion Industry see our CDP Climate Change Investor Response 2018. CO2e emissions include primary data from our main suppliers. carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons ** GHG Protocol Category 1: Purchased products. Charter on Climate Action initiated by UNFCCC. (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). An independent *** Including fuel & energy related activities (0,1%), employee commuting (0,2%), The UNFCCC’s Fashion Industry Charter for Cli- assurance statement related to GRI 305-1 and 305-2 is included on page 106. business travel (0,4%), waste generated in operations (0,02%), franchises (0,1%). mate Action is an industry-wide collaboration to set a decarbonization pathway for the fashion industry,

complementing and supporting other fashion sector What are scopes? STANDARDS & POLICIES initiatives, and aimed at increasing climate action. According to the Greenhouse Gas “indirect” emissions created from the side of our own operations and that Protocol, emissions can be catego- consumption of purchased electric- we therefore have indirect control Through a series of seminars, meetings Policy Push rised into three groups known as ity. Purchased electricity is defined over. This includes our suppliers and and correspondence, together with IKEA Group, scopes: as electricity that is bought or other- the producers of raw materials used WWF and RE100, we informed the European Scope 1 emissions: are defined as wise brought into the organisational in our products, as well as emissions Parliament and the Council about the importance “direct” emissions the we (H&M group) boundary of the company. from the use of products, for exam- of high ambitions in The Clean Energy for All either own or have direct control over. Scope 3 emissions: are defined as ple when our customers use washing Europeans Package, with special focus on energy REPORT WE HOW Scope 2 emissions: are defined as any emissions that are produced out- machines to wash their clothes. efficiency and renewable energy.

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Priority 1 group’s own electricity consumption. We PROGRESS • We are gradually replacing all existing VISION & STRATEGY Leadership in energy efficiency have increased our store energy goal from • In line with our 2025 goal, we lighting with LED, while phasing out We need different approaches to energy a 20% reduction in electricity intensity by achieved a 8.2% decrease in electricity high-intensity discharge (HID) lighting. efficiency in different parts of our value chain. 2020 to 25% by 2030. With 2016 figures as use per store square meter in 2018 We have a varying level of control over energy our baseline, we are measuring this by taking (2017: 2.7%), compared to 2016 base- • We have made substantial energy efficiency across our value chain, with greater into account the amount of electricity used line. This decrease was mainly driven savings in the US and Poland. In 2017 and control over some parts than others. Despite per square metre of sales area and opening by ‘low hanging fruit’ initiatives, such 2018, the US saw decreases of around as improving behavior and routines to 5% both years; Poland has decreased this, we are committed to increasing energy hours. Our store energy management strategy 100% LEADING THE CHANGE efficiency at all stages of our value chain by targets improvements in lighting and HVAC prevent wasteful light consumption. by 20% over the last five years. These optimising maximum possible energy output (heating, ventilation, air-conditioning), which At scale, these simple actions had a results have mainly come from replacing from the smallest, necessary energy input. accounts for 90% of the electricity we use in significant impact. older HVAC units with newer technology our stores. By putting more specific demands and focusing on building management OUR STORES on HVAC systems and replacing HID with • In 2018, we reduced carbon emis- steering. We have a primary focus on improving LED lighting systems, we are confident that sions from our own operations by a energy efficiency in our stores, because – with by 2030 every store we construct will use 40% further 11% compared to 2017. over 4,968 stores – our bricks-and-mortar less energy per square metre and opening portfolio accounts for the majority of H&M hour than those we constructed in 2016. & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100%

4.8. ELECTRICITY USE REDUCTION PER SQM AND OPENING HOUR 4.7. Energy use within our own operations (2016 BASELINE)

2014 2015 2016 2017 2018 ENERGY USE IN GIGAJOULES 2014 2015 2016 2017 2018 n/a n/a n/a 100% FAIR & EQUAL FAIR 100% Building diesel 3,586 716 3,241 3,791 4,355

Direct heating 68,208 44,953 43,347 98,921 134,801 –2.7% Electricity* 3,804,291 4,399,990 4,995,002 5,575,996 5,841,296 STANDARDS & POLICIES

Building natural gas, oil and others 155,937 161,959 178,128 214,558** 205,826

TOTAL 4,032,022 4,607,618 5,219,718 5,893,266 6,186,278

–8.2 %

An independent assurance statement related to GRI REPORT WE HOW *Energy related to electricity based cooling consumption is included. CO2e emissions include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), 302-3 is included on page 106. hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). An independent assurance statement related to GRI 302-1 is included on page 106. **We unfortunately reported the wrong figure of 214,451 in 2017 report. The correct figure is 214,558.

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TRANSPORT & DISTRIBUTION CENTRES Network for Transport Measure Path- VISION & STRATEGY We work to reduce energy emissions in several ways ways Coalition. We are also working within our transport and distribution centre opera- with the Global Logistics Emissions tions. We monitor our own energy consumption Council (GLEC) to support work to and ensure that our distribution centre operations find a global standard that accurately and logistics are as energy efficient as possible. measures logistics-derived emissions.

We work with transport companies and ensure PROGRESS 100% LEADING THE CHANGE we use the most energy-efficient options where • We formed a transport coalition with possible. This involves optimising routes, as well Scania, Eon and Siemens called the as looking at energy efficient vehicles and alterna- Pathways Coalition. Its vision is to create tive fuel options. Transport represents 2% of our fossil-free heavy commercial transport Pathways Coalition. emissions and, with a growing online business, this by 2050 or earlier, in line with the Paris is becoming an important focus area for reducing Agreement. The group aims to acceler- our impact. ate decarbonisation of heavy transport OUR SUPPLIERS PROGRESS and increase electrification. By collabo- Our goal is to create a climate neutral • We are reducing greenhouse

We are members of the Clean Shipping Network, & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% rating across sectors, we can speed up supply chain for our tier 1 and tier gas emissions at a factory level Clean Cargo Working Group, Green Freight Asia and the pace of change and form a louder 2 suppliers by 2030. This commit- through supplier factories voice for advocacy and leadership. ment will involve both an increase in energy efficiency programmes 4.9. CO2e EMISSIONS IN KILO TONNES energy efficiency and a transition to in Bangladesh, China, India and FROM UPSTREAM TRANSPORT AND BUSINESS TRAVEL* • We hosted our second Global Logis- renewable energy. It includes Turkey. The energy savings from tics Sustainability Week. The event the following: our 2018 efficiency improvement 587kt aims to engage our logistics and dis- programs in Europe, China, Indo- tribution centre teams in our sustaina- • 100% of factories enrolled in an nesia, Vietnam and Pakistan are bility work and raise awareness about energy efficiency programme by 633,587,214 kWh, which equals

414kt the importance of improving energy 2025. a reduction of 183,296 tonnes of & EQUAL FAIR 100% 374kt efficiency, reducing CO2 emissions for GHG emissions. 325kt 328kt transport, improving waste recycling • 30% GHG reduction per product by and reuse, and collecting unwanted 2025 compared to 2017 baseline. • We have created a new engage- garments. 80% of distribution centres ment strategy to achieve our goal participated, 12.7 tons of garments • 30% of factories will be enrolled in for energy efficiency and GHG were collected. energy efficiency programme by the reduction in the supply chain. This end of 2019. For 2018, the goal was strategy allows us to work with STANDARDS & POLICIES LEARNING to enroll 20% of factories in energy our remaining suppliers who are • Increased air shipments in some of efficiency programme. If we calcu- diverse in size, energy profile and 2014 2015 2016 2017 2018 our markets in Southeast Asia due to late our progress using the number maturity of energy management. expansion to new geographical areas, of factories we had at the time of this Having conducted a supplier cat- has caused our upstream air trans- goal-setting, we reached this goal. egorisation exercise, we created *Please find an independent assurance statement related to GRI 305-3 on page 106. Reported scope 3 emissions include energy use, goods transport and port emissions to increase. We are However, because the number of targeted strategies and actions distribution, and business travel. CO2e emissions include carbon dioxide (CO2), concerned about this and will look for that directly address each group’s methane (CH4), nitrous oxide (N2O), hydroflourocarbons (HFCs), perflourocarbons factories has substantially increased REPORT WE HOW (PFCs) and sulphur hexaflouride (SF6). Increase in emissions from transport is other ways to distribute our garments unique level of maturity, capacity mainly related to an increase in air freight. Emission data from previous years was since we set the goal, programme likely underreported and actual historic emission data is unavailable. in these areas. enrolment is currently at 18%. and resulting needs.

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Priority 2 4.10. % OF RENEWABLES 100% renewable energy IN OUR OWN OPERATIONS TOTAL VISION & STRATEGY ELECTRICITY USE We are committed to maximising the use of renewable energy in our value chain. 96% 95%* 96% We know that by using more renewable energy and helping our suppliers and customers do the same, we are supporting 78% the transition to fossil-free energy use. 100% LEADING THE CHANGE OUR OPERATIONS We want to source 100% renewable energy in our own operations. This year, 96% of the electricity purchased was renewable. We understand that Electric fleet on the roads of Italy. adding new renewable energy (RE) generation capacity is needed to contrib- 27%

ute to the necessary decarbonisation Going electric in transport operations & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% of energy systems, and we see that it To guide our work in terms of electric trucks in late 2018. ier for our transport service makes good business sense too. As a reducing CO2 emissions from In Italy, we are working providers. The widespread result, our RE purchasing strategy will transportation we have put with a pioneering trans- lack of infrastructure for evolve from today’s focus on Environ- together a Renewable fuel port service provider that electric vehicle charging is mental Attribute Certificates (EACs) to strategy. The key compo- is advocating the usage of also a challenge, as is the a balanced portfolio of Power Purchase nents are to support the use electric vehicles in the Ital- relatively short lifecycle Agreements (PPAs) supporting large- 2014 2015 2016 2017 2018 of electrical vehicles and ian market. This makes up for batteries, and the fact scale renewables projects, rooftop solar *Due to inaccuracy in calculation, the 2017 share has second generation bio-fuels. 19% share of total transport that electric vehicles can PV and EACs. We are also members of been corrected from 96% to 95%.

in Italy, and 79% of the total spend less time on the road & EQUAL FAIR 100% RE100, a group of businesses commit- An independent assurance statement related to In recent years, we have transport in the major cities because they need longer ted to using renewable electricity. GRI AF21 is included on page 106. actively supported the shift of Milan, Brescia, Florence, to charge. to more last-mile deliveries Turin and Rome. All deliver- PROGRESS environmental impact. Despite a 75% by electric vehicles. So far, ies for & Other Stories and In addition to electrical • 96% of the electricity purchased increase in the number of H&M group we use electric trucks in COS in Italy are served by trucks and renewable fuel, was renewable. stores, we reduced our IT operations’ Cyprus, France, China, Italy electric vehicles. we are striving to reduce energy consumption by 48%. This is and Finland. Although this the carbon impact of our STANDARDS & POLICIES • Solar panels covering 800 m² were thanks mostly to new capacity from represents a small share We are working to overcome operations through other installed at our Head Office in Stock- solar panels and heat recovery from globally, in certain markets several obstacles that are measures, including opti- holm. A production of 105 000 kWh data centres. The initiative was lim- a significant percentage of currently slowing the intro- mising transport routes clean energy is expected annually. ited to in-store IT systems, office IT deliveries are performed by duction of more electrical and number of deliveries systems, servers and data centres. In electric trucks. For example, vehicles. This includes a per trip, filling grade, and • This year we have concluded our total, we saved over 27 million kWh, in China, 50% of last-mile changing policy and taxation training drivers to reduce five-year initiative ‘Double Sales – Half the equivalent of 10.9 million kilograms deliveries for store distri- landscape, which makes fuel consumption through HOW WE REPORT WE HOW Impact’ for our IT operations to break of carbon dioxide and electricity cost bution were made using long-term investments risk- efficient driving techniques. the link between business growth and savings of EUR 4 million.

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OUR SUPPLIERS To reach our climate positive goals, VISION & STRATEGY we want to help all our suppliers use renewable energy. However, although some partners already source clean energy, many have limited access to viable renewable energy, particularly in new markets. We are working 100% LEADING THE CHANGE closely with stakeholders, including government bodies, to change this.

PROGRESS • In Vietnam, we signed a Declaration of Support to encourage the government in its efforts to simplify and expand access to renewable energy.

We stand ready to offer further sup- & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% port and advice in pursuit of smart, clean and secure economic growth.

• We continued working with the International Finance Corporation (IFC) to finalise low-carbon roadmaps in our sourcing markets. Working together, we engaged suppliers in several rooftop solar projects and Solar energy is one of the most & EQUAL FAIR 100% demonstrated the business case feasible clean energy solutions. using results of feasibility studies Photo credit: Angie Warren. conducted last year.

• We have initiated several projects with Accelerating solar energy in our supply chain our suppliers in China and India for the We are engaging our suppliers to Like other suppliers, Wuxi Shilead Dyeing erate 2,133,200 kWh electricity every year; installation of rooftop solar panels. accelerate the adoption of renewa- Co., Ltd was convinced by the feasibility >90% of this will be used on-site. The pro- STANDARDS & POLICIES ble energy. The installation of solar studies to embrace rooftop solar. Once ject should make a return-on-investment in panels on factory rooftops is one of live, the 1,98MWp rooftop solar project less than six years and have GHG reduction today’s most feasible clean energy will generate significant positive eco- of 1,755 tonnes. solutions. In China, we have been nomic and environmental impacts, such as working with stakeholders to educate annual 1,883-ton reduction in greenhouse This is just one of the rooftop solar suppliers and support feasibility gas emissions, along with the reduction projects commissioned by our suppliers

studies, as well as project design and of other air pollutants. On average, the in 2018, as a result of our low carbon REPORT WE HOW implementation. 22,000 m² rooftop solar system can gen- roadmap.

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Priority 3 PROGRESS Climate resilience & carbon sinks • We partnered with WWF to launch VISION & STRATEGY SCALE (the Supply Chain and Our commitment to the elimination of greenhouse Landscape approach) in the Eastern gas emissions from our own operations remains as Plains Landscape (EPL) of Cambo- strong as ever. However, we know there will still be dia – home to diverse habitat types unavoidable emissions in our value chain, whatever and endangered species, as well as action we take. We are therefore engaging in activ- valuable ecosystems services. SCALE 100% LEADING THE CHANGE ities to absorb carbon (both within and beyond our exists to design a landscape invest- direct control) to become truly climate positive. ment program that will transform the textile industry and energy supply These activities include supporting mechanisms chains, starting in one of Cambodia’s that reduce existing emissions while strengthening most precious areas of biodiversity, climate resilience. We need to further develop this while bringing multiple benefits to approach and collaborate with experts to move an important but threatened forest solutions forward, and are currently exploring region. This is a pilot project, which opportunities in three areas:

we will use to define a broader set of & RENEWABLE CIRCULAR 100% & RENEWABLE CIRCULAR 100% strategic actions across our produc- 1. Natural carbon sinks – these are nature’s exist- tion areas and supply chains. ing mechanisms for absorbing greenhouse gases. Potential strategies include protecting valuable biomass (such as rainforests) and investing in more sustainable agriculture.

2. Technological carbon sinks – these are technological innovations that absorb existing greenhouse gases and turn them into new products & EQUAL FAIR 100% and materials.

3. Reductions outside our value chain – these activities reduce greenhouse gases coming from sources unrelated to our value chain. We urge innovators and experts to collaborate with us and like-minded STANDARDS & POLICIES partners to develop these opportunities. HOW WE REPORT WE HOW

SCALE project in Cambodia.

H&M GROUP SUSTAINABILITY REPORT 2018 59 OF 109 OVERVIEW VISION & STRATEGY 100% LEADING THE CHANGE

100% FAIR & RENEWABLE CIRCULAR 100% 100% FAIR & EQUAL FAIR 100% & EQUAL & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW

H&M.

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Key facts & figures 2018 VISION & STRATEGY 100% LEADING THE CHANGE

H&M Group’s global supply chain directly contributes to 1.6

million jobs in our tier 1 & RENEWABLE CIRCULAR 100% and tier 2 factories. Our Board of Directors is represented by a 60%:40% 655 factories and (female:male) gender split. 930,000 garment workers are covered by one or both of our key programmes for workplace 100% FAIR & EQUAL FAIR 100% dialogue and Wage & EQUAL FAIR 100% 93% Management Systems. We have signed a new of our business partners This represents 84% of partnership agreement rate H&M Group as a fair our product volume. with ILO.

business partner. STANDARDS & POLICIES

H&M Group hosted a Fair Living Wage Summit in Phnom Penh in December to share the impact, results and main learnings from the last five years� work with the Fair Living Wage Strategy.

OUR FAIR AND EQUAL AMBITION CONTRIBUTES REPORT WE HOW TO SDG 1, 2, 3, 4, 5, 8, 10, 16, 17.

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100% Fair & EqualEqual: KPIs and goals VISION & STRATEGY 100% LEADING THE CHANGE

Our goal-setting process is ongoing. We work with internal and external experts and, wherever possible, follow a science-based approach to defining targets and actions. The KPIs and goals in the table below represent key milestones towards our ambition to become 100% Fair & Equal.

100% Fair & Equal

KPI 2015 2016 2017 2018 GOAL 100% CIRCULAR & RENEWABLE CIRCULAR 100%

No. of supplier factories implementing improved Wage Management Systems 69 140 (29%) 227 (40%) 500 (67%) 50% of product volume by 2018 (% of production volume covered) No. of supplier factories that have implemented democratically-elected worker representation 132 290 (42%) 458 (52%) 594 (73%) 50% of product volume by 2018 (% of production volume covered)

% of business partners regarding H&M group as a fair business partner 84% 83% 94% 93% 90% by 2018

% of employees agreeing with the statement “I feel comfortable being myself at work”, n/a n/a n/a 83%, 81% Year on year improvement and % of employees agreeing with the statement “I am treated with respect and dignity”.*

% of remediated issues (defined by the Bangladesh Accord**) 61% 81% 90% 98% 100% 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100%

*New baseline replacing our previous KPI % of employees agreeing with the statement “People here are treated fairly regardless of age, ethnicity, sex, sexual orientation, disabilities”, as we have made a shift to a new engagement survey platform. **From beginning of 2019, orders will only be placed with supplier factories that are 100% compliant with the Accord requirements. STANDARDS & POLICIES HOW WE REPORT WE HOW

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100% Fair & Equal explained VISION & STRATEGY 100% LEADING THE CHANGE

We believe that everyone connected to our business deserves fair and equal treatment. At H&M group, being 100% Fair & Equal means living by our values and respecting human rights – within our own company and across our supply chain. By providing fair jobs, promoting diversity and growing our business in an increasingly inclusive way, we can contribute toward fair and & RENEWABLE CIRCULAR 100% equal societies.

Our 100% Fair & Equal ambition has tribute to a more open society where every- two focus areas: one is welcome, and we recognise we can promote diversity and equality through 1. Providing fair jobs for all our actions, products and marketing. • within H&M group • within our supply chain Ultimately, by providing fair jobs, being 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% 2. Inclusion and diversity inclusive and encouraging diversity and equality, we can make a positive impact A fair job is defined as one with fair on the lives of employees within H&M compensation, a safe and healthy work- group, workers within our supply chain, place, an environment free from discrim- our customers and wider society. We also ination and one in which every employee believe our approach is good for busi- is heard. At H&M group, we believe that a ness. It makes us an attractive employer STANDARDS & POLICIES fair job should make every individual feel and business partner, it contributes to valued, respected and engaged within stable markets in which we operate, and their workplace. Fair jobs enable people it makes our business more resilient, to enjoy life and provide for themselves productive and sustainable. and their families.

Alongside this, we believe we have a responsibility and an opportunity to drive REPORT WE HOW inclusion and diversity. We want to con- Embroidery work at one of our supplier factories.

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Fair jobs for all: within H&M Group VISION & STRATEGY 100% LEADING THE CHANGE

PROGRESS As one of the world’s biggest We are one team We believe in people Entrepreneurial spirit Constant improvement • We recognised all winners of the Erling fashion and design groups, Persson Award in early 2018. This award we strive to be a fair and gives all H&M group employees the equal employer to 177,000 opportunity to nominate colleagues who contribute to our company culture by colleagues. living our values and creating great results. 100% CIRCULAR & RENEWABLE CIRCULAR 100% We work hard to create a transparent, • We focused on supporting and empow- trustworthy, fair and equal workplace ering our leaders to navigate change in a with great opportunities for everyone. global, fast-paced business. We provided

Our values are the red thread that runs Cost-conscious Straightforward Keep it simple workshops and tools, including the Lead through the fabric of our company. They and open-minded the Way podcast where inspirational inter- come to life in our everyday work and nal leaders and external influence experts create a unique culture that attracts the share their insights. people we need for our continued business success. • Because the engagement of our employ- 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% ees is critical for our business success, we Creating fair jobs within H&M group GROUP launched the People Engagement Pulses is about: (PEP) in October. This is a new survey platform where our employees can voice their • Providing a solid foundation of fair and Our shared values.EN-GEN opinions and give feedback that helps us attractive working conditions. These improve. Overall PEP score for employee include fair labour standards, high engagement was 75 out of 100. STANDARDS & POLICIES health and safety standards, fair and They give us a competitive advantage recruitment processes and by providing competitive compensation, a comprehen- and ensure a sustainable way of work- quality introductory trainings. Offering sive grievance procedure and a coopera- ing. We expect all employees to contrib- all our employees the opportunity to tive workplace dialogue. ute to our company culture by being grow and develop within their role or ambassadors for our values. move on to new roles and responsibil- • Promoting a values-driven way of ities in different parts of our company. working. Our values are the starting • Making sure we have the right peo- Our leaders are role models who lead point for how we do business and how ple in the right positions. We secure the way, and we provide them with clear REPORT WE HOW we interact with the world around us. this through our internal and external expectations and ongoing support.

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Fair jobs for all: within our supply chain (production) VISION & STRATEGY 100% LEADING THE CHANGE

We are working with our suppliers to achieve our ambition that everyone in our supply chain has access to a fair job. Although the concept of a fair job sounds simple, many of the production markets in which we operate are developing countries and they either lack or face challenges in implementing the legislation that would make fair jobs available to all. This creates an & RENEWABLE CIRCULAR 100% industry-wide challenge.

H&M group directly contributes to collaboration and structural change at 1.6 million jobs*, and the textile industry factory, industry and country level. has helped many people and countries out of poverty. H&M group has been Our assessment programme contin- working for many years to ensure that ues to provide a solid foundation for all jobs within our supply chain are our work and is an integral part of our 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% fair jobs. Back in 1998, we started an company risk and human rights due assessment programme to help moni- diligence framework (read more on tor working conditions in supply chain page 92). The programme ensures our factories, which has led to improvements requirements are met, drives contin- ever since. However, certain issues are uous improvement and informs our complex and require collaboration and core social sustainability strategy. Our systemic industry-level action to ensure strategy covers salient global and local STANDARDS & POLICIES lasting change. human rights issues, with a focus on the rights we believe will help us meet our In 2013, in close dialogue with a variety ambition to ensure fair jobs for all. of external experts, unions and international organisations, we updated our social sustainability strategy. It now takes a more holistic approach with an

Worker at Seduno Cambo REPORT WE HOW increased focus on capacity building, Knitting factory in Cambodia. Photo credit: Tiffany Tsang. * Tier 1 and tier 2.

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Enabling well-functioning industrial relations VISION & STRATEGY 100% LEADING THE CHANGE

We believe well-functioning industrial relations are crucial to the creation of fair jobs. We have seen how good working conditions Collaboration towards well-functioning and better wages are more likely to come from good relationships industrial relations between workers, their representatives and management, and effective interactions and negotiations between social partners at a factory, industry and country level. Good labour relations also COLLABORATION & RENEWABLE CIRCULAR 100% PARTNERS support stability and performance in our production markets. Collective bargaining ACT, IndustriAll, IF Metall However, many markets lack the neces- local factory employees and factory man- and collective agreement sary systems to make well-functioning agement. For example, they implement industrial relations a reality. That is our workplace dialogue programmes why, as part of H&M group’s strategy with workers and management to raise Peaceful conflict resolution IndustriAll, IF Metall to achieve 100% fair jobs in our supply awareness of rights and obligations, chain, we are working to improve indus- including the importance of freedom of 100% FAIR & EQUAL FAIR 100% trial relations across our industry and association and collective bargaining. PO & EQUAL FAIR 100% Structures for social dialogue between ILO, Better Work, in all our production markets. This is a teams can also provide worker and man- employers and employees IndustriAll, IF Metall highly complex challenge and involves agement training around the democratic working to: election of workers’ representatives in the factories. Employees and employers awareness about ILO, Better Work, • make sure workers are heard worker rights and responsibilities IndustriAll, IF Metall

• build industry collaborations Worker representatives, trade unions STANDARDS & POLICIES • engage with local governments and workers’ committees are important components for making sure MAKING SURE WORKERS ARE HEARD workers are heard. These can address H&M group has a production office (PO) issues such as working hours, health team in almost every country in which and safety, grievances, etc. Unions are our products are made. Each PO team is particularly well suited to negotiate from management to bridge the gap that representatives, it creates an important responsible for working with our vari- wages in good faith with employers, often exists between the two parties. communication channel and provides ous industrial relations programmes to while worker representatives can use When workers are represented by a a crucial first step towards enabling REPORT WE HOW facilitate stronger relationships between the trust from their peers and respect trade union or democratically-elected well-functioning industrial relations.

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BUILDING INDUSTRY COLLABORATIONS We believe that industry-wide collaboration is VISION & STRATEGY Meeting an elected worker-representative essential to establish the agreements and strategies needed to further improve industrial rela- Our supplier, Newage Apparels LTD, elected their first tions. One of the key relationships we have built is worker participation committee in June 2014. Here, with the trade unions, IndustriALL and IF Metall. we meet Ms. Shahida Khanom, who joined the factory We have a Global Framework Agreement (GFA) in place to improve industrial relations in our supply in 2010 and works as a machine operator. She was 100% LEADING THE CHANGE chain. The GFA focuses on the right of freedom of elected as Vice Chair of the nine-person committee in association and collective bargaining. 2014 and re-elected to the position in September 2017. We have set up National Monitoring Committees I was re-elected because I really (NMC) as a collaborative mechanism under the enjoy contributing to a better Global Framework Agreement (GFA) in Bangla- dialogue between management desh, Cambodia, Indonesia, Myanmar and Turkey. and workers. NMCs are composed of local IndustriALL-

affiliated trade union representatives and local & RENEWABLE CIRCULAR 100% What do you think is important H&M group production office representatives. in your role? NMCs work with partners to co-develop action The Executive Director at plans, establish long and short-term goals for the My role is to gain trust from the Newage Apparels LTD during workers by always listening info session with trainees. implementation of the GFA and deliver agreed carefully to what they have to say action points, most of which concern the facilita- so I can deliver their messages tion of conflict resolution for both employers to the managers. I always try to In Newage Apparels LTD, absenteeism and employees. explain the overall picture of a decreased from 4.8% in 2017 to 3.56% in 2018. challenge in the factory so that The Managing Director, Arif Ibrahim, thinks The role of an NMC is: 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% workers are not disappointed if the improved dialogue between managers and they don�t see quick fixes. workers in the factory is one of the key factors • To create, monitor and evaluate national strate- behind this improvement. gies to implement the GFA. What are the best things about being a Vice Chair? • To create collaboration between trade unions, Name Shahida Khanom It has been great professional workers’ representatives and H&M group suppliers Role Machine operator Efficient workplace and personal development for to support well-functioning industrial relations, STANDARDS & POLICIES me. I have improved my communi- “dialogue is the key to with a focus on dispute prevention and resolution. Why did you want to be cation skills and strengthened re-elected as Vice Chair? my dialogue with both workers become one force, together H&M group is also a founding member of Action I find my daily communication and managers. I am more we can build a better Collaboration Transformation (ACT), a partner- and dialogue with workers and confident overall. It is also a great ship between international brands, retailers and managers in my factory inspiring, feeling to know I am contributing future! trade unions that exists to address the issue of so I decided to stand for re-elec- to improving the workplace a living wage through industry-wide collective ” REPORT WE HOW tion in 2017. I am very happy dialogue in this factory. ARIF IBRAHIM, MANAGING DIRECTOR, bargaining. Read more about our work with ACT NEWAGE APPARELS LTD on page 75.

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ENGAGING WITH GOVERNMENTS Enabling legal and institutional VISION & STRATEGY frameworks is crucial for well-functioning industrial relations. We engage with governments and policy makers directly and indirectly, conduct advocacy work and have an agreement with ILO to cooperate and collaborate 100% LEADING THE CHANGE around the implementation of the Decent Work Agenda. Through our partnerships, we are in a good position to engage with governments and other national stakeholders.

As a partner of ILO, we promote ILO conventions and engage in the debate

on important public policy issues that & RENEWABLE CIRCULAR 100% affect the well-being and rights of the workforce. 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100%

Photo credit: Tiffany Tsang.

PROGRESS • In December 2018, we held our annual • We have been working with Ethical Trading LEARNING • Our industrial relations and workplace global meeting for National Monitoring Com- Initiative (ETI) to raise our concerns about • Our Global Framework Agreement (GFA) dialogue programmes reached 594 mittees (NMCs) in Phnom Penh, Cambodia. Cambodia’s change in trade union law. with IndustriALL and IF Metall is an agree-

factories in 2018 (2017: 458, 2016: 290, Each NMC reported on its progress during ment between the global union of textile STANDARDS & POLICIES 2015: 132). Our 2018 programmes included for 2018 and shared experiences from • Our Memorandum of Understanding (MOU) workers and its affiliated unions to collabo- factories in China, Bangladesh, Cambodia, the past year. The meeting was attended with the Swedish development agency Sida rate for well-functioning industrial relations India, Indonesia, Turkey, Ethiopia, Myanmar, by experts from both the Organisation for shares the common goals of supporting in our supply chain. The GFA is a framework Pakistan and Vietnam. In total, we reached Economic Co-operation and Development ILO’s Decent Work Agenda and developing that can create awareness and maturity 840,000 workers. (OECD) and the International Labour Organ- opportunities that contribute to sustainable between labour market parties to effec- isation (ILO), who hosted workshops on due development in our supply chain. tively negotiate and engage in dialogue. • Factories producing 73% of our product diligence in supply chains, procedures for It will take time to build up the necessary volume implemented democratically- dispute resolution, and the definition of Inter- structures, and we are only at the beginning REPORT WE HOW elected worker representation. national Labour Standards. of this long journey.

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Supporting a fair living wage VISION & STRATEGY 100% LEADING THE CHANGE

A living wage is a human right. Unfortunately, it is not a reality for many people working in many different industries around the world. The fashion industry is no exception.

In 2013, we launched our Fair Living Wage Strategy in an endeavour to change this. As part of this, we set out a & RENEWABLE CIRCULAR 100% vision for all textile workers to earn a fair living wage. This vision was supported with concrete goals and actions, in our supply chain and across the textile industry.

OUR FAIR LIVING WAGE STRATEGY We launched our global Fair Living Wage Strategy in 2013 with guidance from multiple experts, trade unions, suppliers and NGOs. 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW

Photo credit: Tiffany Tsang.

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GOALS AND RESULTS When we devised our Fair Living Wage Strategy, we set measurable goals, milestones VISION & STRATEGY Our Fair Living Wage Strategy and actions to be achieved between 2014 and 2018. As we started to accomplish these, Our strategy sets out clear goals and actions we used what we’d learned to increase our ambitions, setting further goals, expanding for four target groups: governments, factory owners, our scope and improving our measurements. This process led to the development of brands and, most crucially, factory employees. five key goals for 2018:

Governments H&M Group 100% LEADING THE CHANGE Goal Continue to advocate Goal 90% of business partners governments and the public should regard H&M group as a on wages. fair business partner by 2018. Result In 2017, ACT was recognized as Result We exceeded this goal, 93% of our a credible initiative to work on living business partners see H&M group as H&M wages by G20. a fair business partner. We assess this GROUP figure on an annual basis through an GOVERNMENTS Factory management extensive anonymous supplier survey.

Goal Ensure that supplier & RENEWABLE CIRCULAR 100%

factories producing 50% of Factory employees H&M group’s product volume have Goal Ensure that supplier democratically-elected worker rep- factories producing 50% of resentation in place by 2018. H&M group’s product volume are imple- Result We exceeded the goal. 73% of our menting improved Wage Management product volume is made in factories Systems by 2018. FACTORY FACTORY that have democratically-elected worker Result We exceeded the goal. 67% of MANAGEMENT EMPLOYEES representatives in place. This covers 594 our product volume is made in factories factories and about 840,000 workers. that are implementing improved Wage 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% You can find more information about Management Systems. This covers 500 this goal and other elements of our strat- factories and about 635,000 workers. egy to strengthen industrial relations on page 66. You can find an overview of all our goals and results here. Goal Ensure that 100% of supplier

factories in Bangladesh have democrat- STANDARDS & POLICIES ically-elected worker representation in place by 2018. Result We reached this goal ahead of FAIR schedule. 100% of our tier 1 supplier LIVING WAGES factories in Bangladesh had democratically-elected worker representation by December 2017. HOW WE REPORT WE HOW

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KEY IMPACTS OF OUR FAIR UNDERSTANDING THE DIFFERENT LIVING WAGE STRATEGY COMPONENTS OF WAGES VISION & STRATEGY Achieving our goals means that today, Wages are a complex issue. In order to 930,000 garment workers work in achieve fair living wages for all garment factories that are either implementing workers, it is important to understand improved Wage Management Systems the components of a textile worker’s or have democratically elected worker monthly take-home wage and how they representation – or, in most cases, can be influenced. In general, there are 100% LEADING THE CHANGE both. This is an important achievement two components: that lays the foundation for structural changes by making sure workers’ voices The biggest component is minimum are heard in a better way. wages which are stipulated by governments and the lesser component is indi- Over the last five years, we have ana- vidual wage setting and factory benefits. lysed data from hundreds of factories Combined, these components make up in some of our most important sourcing the take-home wage for garment workers.

markets to gain further understand- & RENEWABLE CIRCULAR 100% ing of the impacts that have and can We believe that improved Wage Manage- be created at a factory level. We have ment Systems will help factories become learned that our work can achieve great fairer and more transparent in the way progress in individual factories, but it they work with individual wage setting has limitations – we need broader per- and bonuses. We have supported our spectives, involvement at industry level suppliers in establishing transparent and legislation. wage grids in their factories, which show

Seamstress in one of our supplier factories. Photo credit: Tiffany Tsang. 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100%

Functional wage management system should include: Wage components

1. Proper and correct payment of wages 3. A progressive and coherent pay system Benefits and other additions according to individual contracts, legal that rewards workers according to Wage (such as skill or performance STANDARDS & POLICIES management recognition, etc.) regulations and existing collective their skills, education, performance and systems bargaining. experience, etc. in the factory TAKE- HOME 2. Internal development of human 4. Proper mechanisms for workers’ involve- Government WAGES resources policies and processes to ment in factory decisions, including those Minimum wages regulations ensure competitiveness, high motiva- that generate a process of communica- and collective tion and sustainable social climate in tion and possible negotiations on the con- bargaining agreements the factory. tent of wages and payment structures. REPORT WE HOW

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workers how they are rewarded for differ- those which don’t (see tables no. 5.1. and dies, medical insurance, free child care or is important for factories to implement ent skills, tasks, education, and seniority, 5.2.). In 2017, the difference ranged from health services, and transport subsidies. improved Wage Management Systems VISION & STRATEGY etc. This allows workers to understand 8% higher take-home wages in Bangladesh This is not reflected in the take-home and similar measures, this is not the how they can influence their wage by to 29% in Indonesia. In 2018, the differ- wage figures mentioned in graph 5.1., but whole solution to a future of fair living improving their skills and performance, ence ranged from 2% in Turkey to 11% it means workers spend less money or wages for workers. etc. At the same time, the improved Wage in Indonesia. In Myanmar first factories receive additional benefits. Management Systems strengthen and started implementing improved Wage For this reason, our strategy has always mature Human Resources management Management Systems in late 2017 which By creating incentives and structures looked beyond individual factories to 100% LEADING THE CHANGE systems, which should lead to increases is why first results show a positive devel- that reward workers’ skills, performance find solutions that can increase mini- in motivation, retention and productivity opment since 2018. and loyalty, etc., we can make significant mum wage in a sustainable and compe- among the workforce. improvements to the situation of work- tition-neutral way. These solutions bring Besides higher take-home wages, the ers and the operations of our supplier together all relevant actors, from govern- When analysing the data from supplier factories that are enrolled in our Wage factories. However, there is a limit to both ments, factory owners and other brands, factories in our key market suppliers, we Management System programme (but also how much can be achieved at a factory to workers and trade unions. Learn more can see that the factories which are imple- all other factories) increasingly provide level, and to how much above the indus- about how we work with Wage Manage- menting improved Wage Management workers with non-monetary benefits, such try standard a factory can pay without ment Systems here.

Systems pay higher take-home wages than as subsidised or free meals, housing subsi- losing their competitiveness. So, while it & RENEWABLE CIRCULAR 100%

5.1. Impact of Wage Management Systems* 5.2. Progress of take-home wages 2017–2018*

2017 2018 2017 IN USD 2018 IN USD INCREASE

Bangladesh +8% +5% Bangladesh 123 136 11% 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% Cambodia +19% +10% Cambodia 250 294 18%

China +8% +5% China 553 636 15%

India +12% +5% India 164 199 21%

Indonesia +29% +11% Indonesia 235 255 8%

Myanmar –6% +3% Myanmar 115 152 32% STANDARDS & POLICIES Turkey +10% +2% Turkey 615 706 15%

Difference in take-home wages, between supplier factories implementing improved Increase in take-home wages at factories implementing improved Wage Wage Management Systems vs factories not yet enrolled in such a programme Management Systems HOW WE REPORT WE HOW *The figures are based on data gathered from tier 1 textile supplier factories. Time frame of data for 2017 is 1 Jan–31 December 2017. Time frame of data for 2018 is 1 Jan–30th June 2018 . The data has been collected through our SIPP method and has been validated by H&M group’s developers in the different production markets. The data is weighted by factory in flat averages. We are currently working to further improve our data method and instead report wage data as a weighted average per worker, since we see it as a better and more representative measure of salary in a country. We plan to report according to this new method with our 2019 report. The Conversion to USD is based on Swedish Central Bank average exchange rate for the period.

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Improving Wage Management Systems at Ekpen Tekstil VISION & STRATEGY

H&M group is working with Manager at our production Ahmet Yavuçehre, the factory suppliers in ten production office in Turkey, says the work owner, is convinced of the countries to implement creates a ‘win-win situation’: benefits of this new approach: improved Wage Management “The steps taken by Ekpen “I believe this system gives

Systems. We want factory Tekstil to implement improved workers more opportunities 100% LEADING THE CHANGE management to understand Wage Management Systems and increases their trust in the why and how they should be taking employees’ individual company. It also contributes to rewarding their workers for skills, education and a happier work environment as their skills, experience, etc. experience into account, well as improved productivity”. supported by open and Ekpen Tekstil, a supplier constructive communication, The changes have also been factory in Turkey, is one of contribute to a more positive well received by employees: 500 factories we’re working work environment.” “I worked in some other

with in this way. It has been companies before and the & RENEWABLE CIRCULAR 100% producing for H&M group for As part of the improvements salary was the same for all 16 years and today, employs to its Wage Management Sys- employees. I find the pay- about 200 workers. We’ve tem, Ekpen Tekstil has involved ment system in Ekpen quite been working with employers worker representatives in fair. It is linked to the perfor- and employees locally for choosing which parameters mance and effort, and open two years to improve their wages should be based on to workers’ feedback.”, says Wage Management System. and what development skills Hatice Ertekin at packing Melek Bozova and Aynur Akbaba. Durmus Bozkurt and Huseyin Bakir. Julia Bakutis, Sustainability should be offered. department. 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100%

I work in a more motivated “way as I already know how STANDARDS & POLICIES my salary can be increased by my performance.” DUDU OZALTUN, MACHINE OPERATOR, SEWING DEPARTMENT HOW WE REPORT WE HOW Julia Bakutis, H&M group. Ekpen Tekstil.

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When looking at all H&M group’s We share the view of the UN body ILO supplier factories, including those not and many other experts, that the only VISION & STRATEGY enrolled in our Wage Management lasting and viable way to achieve sub- System programme and excluding any stantial and sufficient increases in the overtime compensation, we can see that minimum wage for all workers is through H&M group supplier factories pay signif- fair negotiations between workers, trade icantly higher wages than the relevant unions and employers. This requires minimum wage. For 2018, this ranges collective bargaining agreements that 100% LEADING THE CHANGE from 24% more in Cambodia to 122% empower workers’ representatives to more in China (Guangdong). engage in fair negotiations. This approach replaces the idea that global brands Increases are in most markets often should impose specific wage levels, a above inflation rates according to the short-sighted tactic that undermines the IMF. However, even if the wage incre- role of workers, unions, employers’ organ- ments are higher than the inflation rate isations and governments to effect lasting in a majority of the countries, workers are change. Wages are an industry-wide chal- Photo credit: Tiffany Tsang.

facing increments of housing rents, food lenge, and therefore need to be solved at & RENEWABLE CIRCULAR 100% prices, etc. which leads to no real wage an industry level to stand the test of time. increment for the workers in the end. Instead of imposing specific wage levels, 5.3. Average monthly wages (excluding overtime) brands should ensure that our purchas- FROM MINIMUM WAGES TO INDUSTRY- ing practices facilitate the payment of a at H&M Group factories vs applicable minimum WIDE COLLECTIVE BARGAINING living wage and enable collective bargain- wages in key production markets* To achieve industry-wide living wages, ing. Brands also need to advocate govern- minimum wages must increase. The ments because they can set the necessary minimum wage is the most important legal framework, ensuring the right to Difference Average Average between average benchmark for wages in the industry freedom of association and enabling col- 100% FAIR & EQUAL FAIR 100% Minimum wage (excl. Minimum wage (excl. wages (excl. and usually defines the biggest portion lective bargaining. & EQUAL FAIR 100% wages overtime) wages overtime) overtime) and 2013 2013 2018 2018 min. wages 2018 of a worker’s income. Today, it is usually in USD** in USD** in USD** in USD** in USD** defined by minimum wages, which are This is not an easy thing to achieve, Bangladesh 42 64 67 100 49% set by governments. especially considering trade union

Cambodia 97 99 177 219 24% representation is low in many sourcing Over the past five years, minimum wage markets and industrial relation sys- China (Guangdong) 183 385 225 501 122%

levels have increased substantially in tems are often immature or even legally STANDARDS & POLICIES India (Bangalore) 91 115 115 145 26% several countries – wages are up by 82% restricted. However, we believe this is the Indonesia 104 149 155 194 25% in Cambodia and 60% in Bangladesh. only way that workers wages can increase While this is a positive development, these in a sustainable way, with a level playing Myanmar 53 75 79 116 47% increases are not enough. Too often, they field. While it takes time to change com- Turkey 370 475 432 598 38% simply reflect the poverty line in these plex systems like this, we can see signif- countries and neither keep up with infla- icant progress and a growing consensus tion nor the growth in industry in these between relevant stakeholder groups to HOW WE REPORT WE HOW *The scope is all tier 1 and tier 2 suppliers, all product types. markets. As a result, the minimum wage collaboratively drive structural change at **Conversion to USD based on Swedish Central Bank average exchange rate for the period. Time frame of data for 2013 is 1 Jan–31 December 2013. Time frame data for 2018 is 1 Jan–30th June 2018. in most markets is not a living wage. an industry and country level.

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ACT: ACTION, COLLABORATION, PURCHASING PRACTICES TRANSFORMATION A brand’s purchasing practices are an VISION & STRATEGY The formation of ACT represents a sig- important contributor to achieving fair nificant milestone on the journey to fair living wages. We developed a purchas- wages. ACT is a ground-breaking coali- ing practice guide as part of our 2013 tion of 22 global brands, including H&M roadmap. It helps ensure best possible group, and IndustriAll Global Union. The capacity planning, timely payments and much more. Thanks to these measures,

group’s mission is to transform the gar- 100% LEADING THE CHANGE ment, textile and footwear industry and 93% of our suppliers regard H&M group as achieve living wages for workers through a fair business partner. collective bargaining at industry level. We also developed a ‘scientific pricing One particularly game-changing com- method’. This involves suppliers sharing ponent in ACT’s approach is to include with us all the major cost components brands’ purchasing practices in the that contribute to a product’s price, equation. While local employers and including the labour cost component.

trade unions should negotiate wage levels This means merchandisers can and will & RENEWABLE CIRCULAR 100% and working conditions with each other, negotiate the price of a garment with our brands can contribute with a commit- suppliers around all component costs ment to responsible purchasing practices. except one: labour. This takes garment For example, they can offer long-term workers’ wages out of the equation for commitments to source from suppliers price negotiations. If wages increase and markets that are willing to enter such as a result of a collective bargaining a collective bargaining agreement. To agreement, our method ensures the support this, all ACT brands have signed money needed to pay for these wages is a Memorandum of Understanding with accounted for. Together with the other 100% FAIR & EQUAL FAIR 100% IndustriAll Global Union, which commits brands within ACT, we are committed & EQUAL FAIR 100% them – amongst other things – to ensure to ensure that higher wages are covered that their purchasing practices facilitate by our purchasing price. We believe this the payment of a living wage. systematic isolation of the labour cost is important as an enabler to an industry- By addressing the structural barriers to living You can read more about ACT and wide collective bargaining agreement. the meaning of an industry-wide collec- STANDARDS & POLICIES “wages, ACT has the best chance of increasing tive bargaining agreement here. garment workers’ wages in a way that is scalable, sustainable and enforceable. JENNY HOLDCROFT,” ASSISTANT GENERAL SECRETARY, INDUSTRIALL GLOBAL UNION HOW WE REPORT WE HOW

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Creating win-win-win situations with VISION & STRATEGY good purchasing practices DAVID SÄVMAN, HEAD OF PRODUCTION, H&M GROUP

What does the term we can be more concrete and

purchasing practices credible towards both suppli- 100% LEADING THE CHANGE mean to you? ers and production countries, It simply means doing good and show that we can and business! Our purchasing prac- will stand by our purchasing tices should make it possible practices. It also means that to fulfil our business idea and we can do better business give long-term benefits to and minimize challenges for workers, suppliers, customers workers to get better working and the environment. During conditions.

2018 we focused on suppliers’ & RENEWABLE CIRCULAR 100% production plans, our execu- How does the scientific tion and follow up of produc- pricing method work? tion volumes, as well as how We transparently look at all we can secure ring-fencing parts of producing a product labour costs in price negoti- and make sure we have the ations. This means when we right cost that creates win-win- negotiate price with a supplier, win situations: for the workers, the labour cost is taken out of our business partners and for the equation. H&M group. 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100%

How do you isolate the You developed an app based labour cost? on this method that other We exclude the labour cost from companies can use to isolate our price negotiations with the labour costs in the same David Sävman. supplier. When we negotiate way?

the price, it can only affect the Yes! The app is called SEA STANDARDS & POLICIES material and quality, for example, (SMV Estimation Application), Our purchasing practices should make it possible to fulfil and not the workers’ wages. and it’s basically old facts packaged into a modern and “our business idea and give long-term benefits to workers, What does the isolation of user-friendly way! We believe the labour cost mean to that the only way to create suppliers, customers and the environment. workers, suppliers and our change in the industry is to get DAVID ”SÄVMAN, HEAD OF PRODUCTION, business? as many brands as possible to HOW WE REPORT WE HOW H&M GROUP By isolating the labour cost, join us.

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WORKERS AND SUPPLIERS ARE PROGRESS • In December 2018, we shared the LEARNINGS BETTER PREPARED FOR COLLECTIVE • We reached and exceeded the Fair ETI’s feedback from 150 key stake- • Together with trade unions and other VISION & STRATEGY BARGAINING AGREEMENTS Living Wage Strategy goals we set holders at an event in Phnom Penh. experts, we have learned that the best As part of our Fair Living Wage Strategy, we in 2013. In five years, this work has Through this kind of openness, we can way to achieve wage increases in a have placed a strong focus on establishing well- reached 655 factories and more than jointly advance best practices, learn scalable, lasting and competition-neutral functioning dialogue and democratically elected 930,000 garment workers in ten differ- from shared challenges, and set the way is through industry-wide collective worker representation in factories. We exceeded our ent countries. Read more on page 79. framework for joint steps forward to bargaining agreements. 2013 goal for 50% of our product volume to come

ensure fair living wages for all garment 100% LEADING THE CHANGE from factories with democratically elected worker • ACT has brought together 22 differ- workers. • We recognise that we cannot achieve representation, reaching 73% by 2018. Democrati- ent brands as well as trade unions to industry-wide living wages only through cally elected representation provides workers with work together to achieve industry-wide • In Ethiopia, the Government has not factory level interventions. To achieve better opportunities to make their voices heard and collective bargaining agreements, ratified the ILO Minimum Wage and sustainable increases, minimum wages resolve any issues that arise. supported by brands’ common com- has not set a minimum legal wage for have to increase. Although there have mitments on purchasing practices. As the private sector. In 2018, together been significant increases in minimum Democratically elected worker representation part of this, all signatory brands have with the ILO we have engaged with the wages in several markets, the change has also helps prepare suppliers for an industry with signed Memorandums of Understand- Ethiopian Government to advocate for been too small and too slow to achieve

maturing industrial relations. Many of our supplier ing, which commit them, amongst a minimum wage-setting mechanism industry-wide living wages. & RENEWABLE CIRCULAR 100% factories undergo a mindset shift when they initiate other things, to ensure their purchasing for the textile industry. Although we this kind of change, in which they recognise the practices facilitate the payment of a believe this process might take a long benefits of improved dialogue with their workers living wage. time, we are fully committed to support and worker representatives. In turn, this leads to an the ILO driven agenda. openness in addressing specific key issues such as • H&M group developed and imple- worker well-being, health and safety, or wages and mented a ‘scientific pricing method’, compensation. which systematically removes labour costs from price negotiations with sup- Alongside this mindset shift, we have also seen an pliers, therefore ensuring that labour 100% FAIR & EQUAL FAIR 100% increase in the number of supplier factories with costs are paid and accounted for with & EQUAL FAIR 100% one or more trade unions. While this is a positive each product order. development that we will continue to support, more needs to be done by all actors involved. You can find • We asked the Ethical Trading Initiative out more about our Industrial Relations strategy on (ETI) to review our Fair Living Wage page 66. Strategy and implementation, and to

compile an independent evaluation STANDARDS & POLICIES report. We recognise and have already addressed several of the report’s findings, such as further developing our purchasing practices using the above-mentioned scientific pricing method. With help from other stakeholders, we’ll continue to address HOW WE REPORT WE HOW issues as we develop our strategy. ETI’s Panel discussion at the Fair Living Wage report is publicly available here. summit in Phnom Penh, Cambodia.

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NEXT STEPS with various actors. Therefore, Interview with Frank Hoffer, Executive Director of ACT We remain committed to our vision we will further expand our work VISION & STRATEGY of achieving fair living wages for all with key partners in the industry ACT (Action Collaboration workers in the garment and not up for negotiation, which textile workers. We will continue moving forward. This includes Transformation) is a group of textile producing countries. ensures that workers’ wages to work with our supplier factories continuing to work with ACT and 22 brands and retailers that are not negatively affected. to further build on the positive its ground-breaking approach to are working together with What role does H&M group learnings and impacts from the achieving fair living wages. implementation of improved Wage

IndustriALL towards a future play in ACT? Why does the industry need 100% LEADING THE CHANGE in which all textile workers H&M group has been at the ACT? Management Systems, as well as the We will continue to take a leading earn a fair living wage. forefront of our discussions, We are trying to prove that implementation of democratically role in driving such collaboration particularly around finding worker representation can elected worker representatives. forward, and continue to contribute What makes ACT different? practical solutions. For exam- lead to positive change. Some Beyond this, we know we’ll con- by sharing our future learnings, ACT is something that has ple, it is important that the of the countries we work tinue to need strong collaboration challenges and achievements. never been tried before. It’s a brands buying from textile with have experienced other joint initiative between major suppliers make sure their forms of worker representa- brands in the garment and respective purchasing prac- tion, including bargaining by

textile industry, plus Indus- tices support a living wage. riot. We show these countries & RENEWABLE CIRCULAR 100% triALL, which has a clear One of the agreements H&M a different way – that it is objective to work together group helped with is that the possible to build systems to to achieve living wages for wage cost on a product is create stable and predictable development.

What has ACT achieved so far? Bringing all these stakeholders together was our Progress against the H&M group’s 2018 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% first achievement. Our “ second was to agree to use targets already points to the measurable industry-wide collective contribution such strategies can make bargaining to engage with national actors in countries towards key Sustainable Development like Cambodia, Myanmar, Goals. The company’s next targets must Turkey and Vietnam. Our STANDARDS & POLICIES third achievement was to maintain and increase the pace of change. present the shared message that international brands – And even more companies within and like H&M group – will make a country a preferred country beyond the apparel sector should feel of sourcing if they share our challenged to follow suit. vision of a living wage for

” REPORT WE HOW CAROLINE REES, Frank Hoffer. textile workers. BUSINESS & HUMAN RIGHTS EXPERT, PRESIDENT AND CO-FOUNDER OF SHIFT

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Overview of our industrial relations, VISION & STRATEGY workplace dialogue and wage management system programmes

This map shows the number of factories and workers CHINA covered through our industrial relations, workplace • Workplace dialogue training 100% LEADING THE CHANGE dialogue and wage management programmes. in 182 factories, reaching 70,707 workers. BANGLADESH • 195 factories are imple- • Workplace dialogue training in 183 menting the improved Wage factories, reaching 490,722 workers. Management System, reaching 76,412 workers. • 108 factories are implementing the improved Wage Management System, reaching 321,287 workers.

TURKEY • Workplace dialogue training in 64 factories, reaching 16,577 workers. • 62 factories are implementing the improved Wage Management CAMBODIA & RENEWABLE CIRCULAR 100% System, reaching 15,798 workers. • Workplace dialogue training in 20 factories, reaching 42,286 workers. • 21 factories are implementing the improved Wage Management PAKISTAN System, reaching 45,539 workers. • Workplace dialogue training in 33 factories, reaching 52,600 workers. • 12 factories are implementing the improved Wage Management System, reaching 26,300 workers. VIETNAM • Workplace dialogue training in 11 100% FAIR & EQUAL FAIR 100% factories, reaching 22,775 workers. & EQUAL FAIR 100% • 13 factories are implementing ETHIOPIA the improved Wage Management System, reaching 37,026 workers. • Workplace dialogue training in 6 factories, reaching 10,486 workers. • 1 factory is implementing the improved Wage Management System, reaching 1,660 workers.

INDONESIA STANDARDS & POLICIES MYANMAR • Workplace dialogue training in 25 factories, reaching 57,281 workers. • Workplace dialogue training in 11 INDIA factories, reaching 12,402 workers. • 23 factories are implementing the improved Wage Management • Workplace dialogue training • 15 factories are implementing the System, reaching 51,327 workers. in 66 factories, reaching improved Wage Management 72,819 workers. System, reaching 17,034 workers. • 62 factories are implementing the improved Wage Management System, reaching 69,049 workers. HOW WE REPORT WE HOW

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Addressing human rights issues VISION & STRATEGY 100% LEADING THE CHANGE

Respecting human rights is a fundamental part of H&M group’s paid his schooling fees. Read more PROGRESS about our requirements on page 96. • H&M group actively participated in responsibility as a company and vital to the sustainable If we find any person below the mini- the multi-stakeholder Responsible Mica operations of our business. mum age working in any of our supplier Initiative (RMI), which is working towards factories, then our Child Labour Policy responsible Indian mica mining. We took Our Human Rights policy requires us to example, our Fair Living Wage strategy guides us (and our supplier) to act in part in working groups for ‘Traceability and have sound due diligence and risk assess- can make an indirect positive difference the best interests of the child. This can Specifications’ and ‘Community Empower- ment processes in place to identify any to children’s lives because it helps parents include ensuring that the individual ment’, in which 40 villages were selected & RENEWABLE CIRCULAR 100% risk of doing harm in our operations and earn a sustainable living. We also collab- enrols in school, providing compensa- for empowerment programmes. We have our supply chain. Our due diligence pro- orate with the Centre for Child Rights tion to the family for lost income and also had continued dialogue regarding cess is described on page 92, along with and Corporate Social Responsibility partnering with civil society organisa- mica mining with stakeholders in our own how we identify salient human rights (CCR CSR) to improve and develop young tions. Please find a full list of our Salient supply chains. issues. Read more about H&M group’s workers’ life skills. This is described in a Human Rights issues here and further policies at sustainability.hm.com. film produced by Global Child Forum and details on how we address human rights • In Myanmar, we are in the third year of a CCR CSR. issues in our supply chain on page successful collaboration with Centre for We have identified a living wage, freedom 80–82. Child Rights and Corporate Social Respon- of association and collective bargaining We make it an absolute, minimum sibility (CCR CSR). In 2018, we engaged 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% as human rights issues that are most requirement for all factories producing 10 of our factories in a project to prevent important to address in securing fair jobs for H&M group to be free from child child labour and protect young workers. for all. Not only are they important rights labour and this compliance is contin- The project aims to train factory manage- by themselves, but they also enable the uously monitored. The likelihood of ment and raise awareness among workers establishing of other rights. In the pre- child labour taking place in an H&M on the prevention and remediation of child vious section of this report, we describe group-supplying factory is very small. labour. We have now covered all our sup- how we address them. In this section, we During 2018 we identified 1 case of an plier factories, in total 45 in Myanmar over STANDARDS & POLICIES will describe how we identify and address underage worker in a factory in China. the course of our work with CCR CSR. additional human rights issues. The boy was 15 years and 10 months old (in China minimum working age is • We engage and support UNICEF and ADDRESSING CHILD RIGHTS 16 years). In dialogue with the boy and NBIM’s (Norges Bank Investment Manage- AND CHILD LABOUR his family it was agreed, that he should ment) work on the framework to the Chil- We recognise the importance of contrib- attend a vocational training school until dren’s Rights Principle in the Garment and uting and strengthening children’s rights he reached legal working age. During Footwear Supply Chain, which focuses on by improving life for children and young this time, the factory compensated him the fashion industry’s impact on children REPORT WE HOW people, both directly and indirectly. For in line with the legal minimum wage and with working parents.

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ADDRESSING FORCED LABOUR PROGRESS ADDRESSING HEALTH & SAFETY PROGRESS As with our approach to child labour, • We collaborated with Mekong Club, Our priority is to ensure that all • The High Court of Bangladesh inter- VISION & STRATEGY we continuously monitor compliance Hong Kong, which produced training workplaces in our business and supply vention has changed the scenario and with the absolute minimum require- material on forced labour and modern chain are places that always prioritise we keep monitoring the situation closely. ment that all factories producing for us slavery. We incorporated this material health and safety for workers. Where H&M group has a close and constant are free from forced labour. into the relevant training for various func- hazards do occur, these workplaces dialogue with the Bangladesh authorities, tions within H&M group. must take preventative measures to BGMEA, ILO and other stakeholders. Our safeguard and protect workers’ safety. position is that the timeline must secure We have due diligence processes in 100% LEADING THE CHANGE place to ensure we identify and address • We engage with AMCO (Amsterdam One of these preventative measures is the possibility for a smooth and progres- any risks of forced labour. We describe Coalition), a group of leading brands who to involve workers in health and safety sive transition of the Accord to a national our ongoing work to address the are developing a sector-wide approach awareness-raising, and to secure griev- regulatory body. Our presence and specific risks of forced labour in our that focuses on due diligence and ance channels that enable workers to commitment in our production markets is Modern Slavery Statement, which is responsible sourcing from India. This raise safety concerns. This requires long-term. H&M group has been sourcing published each financial year alongside group consults regularly with impor- worker representation, dialogue with from Bangladesh over three decades and our annual sustainability report. tant civil society stakeholders, and in factory management about issues of currently we source from around 250 pro- 2018 established an industry platform concern, and worker involvement in duction units. For further reference, our

for responsible business conduct with decisions that affect workplace-related supplier list has been public since 2013 at & RENEWABLE CIRCULAR 100% Indian manufacturing businesses and the health and safety issues. sustainability.hm.com. OECD’s Responsible Business Conduct unit. The platform exists to address due ADVANCING THE BANGLADESH • 98% of our suppliers have remediated diligence challenges and opportunities ACCORD issues as defined by the Bangladesh in Indian supply chains through shared H&M group actively supports the Accord. Effective January 2019 we only research and capacity-building activities. Bangladesh Accord, which was set up place orders with factories that 100% in May 2013 to help improve fire and comply with the Accord requirements. • In India, three of our spinning mill suppli- building safety in the textile industry ers are participating in the Ethical Trading in Bangladesh. We were one of the first 100% FAIR & EQUAL FAIR 100% Initiative’s Tamil Nadu Multi-Stakeholder companies to sign the Accord and have & EQUAL FAIR 100% programme (ETI TNMS). This programme been on the steering committee since focuses on awareness training around day one. The Bangladesh Accord is now workers’ rights, health, safety and nutrition monitoring over 1,600 factories. in spinning mills in south India. Initially, the Accord was meant to be

• We continue to refine the due diligence transferred to a local national regula- STANDARDS & POLICIES process in our supply chain. We have tory body by May 2018. However, this included target outcomes in our goal-set- transfer process depended on the local ting process at a global and national level. body satisfactorily demonstrating its capacity to inspect factories, protect • In Vietnam, together with IOM (Inter- workers, provide transparency and national Organization for Migration) we offer confidential complaints mech- have provided awareness training to anisms. A Transitional Accord was Worker at one of our supplier 13 of our suppliers on forced labour signed in 2017 and became effective in REPORT WE HOW factories in Cambodia. Photo credit: Tiffany Tsang. and modern slavery. June 2018.

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ADDRESSING SOCIAL SECURITY PROGRESS Social security is a human right, and • In Cambodia, the legislation regarding VISION & STRATEGY includes benefits such as healthcare, Fixed Duration Contracts (FDCs) and sick pay, work-related injury coverage Undetermined Duration Contracts (UDCs) and maternity leave. Social security can was amended by the government during be undermined by recruiting and hiring 2018 to better facilitate the use of UDCs methods that exclude people from social – which are typically more secure for workers. We have started to map the ratio security schemes. Modern slavery is the 100% LEADING THE CHANGE worst example of this. Permanent forms of UDCs to FDCs in our supply chain, and of employment usually entitle employees in 2019 we will work with suppliers and to social security benefits, but in many workers to increase the transition from countries, employment schemes do not FDCs to UDCs. Although progress on this always entitle their workers to the same issue has taken longer than expected kind of protection. In fact, some schemes since we first identified the problem, can limit a worker’s ability to exercise we have recently started to see signs of their rights. positive change. 100% CIRCULAR & RENEWABLE CIRCULAR 100% At H&M group, we seek to minimise • In Turkey, H&M group is building capacity these limitations by working with sup- and collaborating with various stakehold- pliers to improve the terms they offer ers to enable the formal employment of their workers. This starts by ensuring Syrian refugees in our supplier factories suppliers and factory management are in Turkey. As of 2018, more than 300 both aware of and meeting their obliga- Syrian refugees are employed in over 20 tions under labour and social security approved units in Turkey, supported by the laws. We then look to identify instances United Work programme. The ILO SCORE in which social security obligations initiative invited factory units employing 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% are being systematically avoided. For Syrian refugees to participate in a training example, some suppliers avoid providing programme. Four facilities have partici- better employment schemes through pated so far, and the programme focuses the continued use of short-term con- on functional workplace dialogue and tracts rather than the offer of full-time health and safety committees. employment.

• In Italy, we engaged in a working group STANDARDS & POLICIES We also ensure that especially vulnera- to map resources amongst local trade ble groups such as refugees can access unions and government programmes social security system through proper that ensure responsible conditions for registration. migrant workers. HOW WE REPORT WE HOW

Photo credit: Tiffany Tsang.

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Inclusion & diversity VISION & STRATEGY 100% LEADING THE CHANGE

Through relationships with our employees, business partners and H&M colleagues starring in “Love for customers, and through our global presence, H&M group represents All” campaign in Amsterdam during and connects with a huge number of people around the world. This Pride week. presents us with a unique opportunity to drive inclusion and diversity.

We believe each and every individual step in implementing our strategy was should be treated fairly and equally, and the roll out of a new training programme & RENEWABLE CIRCULAR 100% are therefore dedicated to advancing on inclusion, diversity and unconscious inclusion and promoting diversity. We bias, which raises awareness and helps aim to understand, reflect and advance us shape our goals, as well as identify the inclusion of every person we connect improvement areas. Several markets, with – from suppliers to customers – in including South Africa and USA, have all the diverse markets in which we oper- teamed up with external partners to ate. We believe this is the foundation for customise their own training on inclusion great customer experience and key to our and diversity. 100% FAIR & EQUAL FAIR 100% ongoing success. & EQUAL FAIR 100% Our ambition is to be inclusive and In 2018, we intensified our continuing become more diverse at all levels of our work around inclusion and diversity. One company. This will optimise our deci- of the reasons was the key learning from sion-making and team performance, and the children’s hoodie, which many per- ensure we reflect and respect the diversity ceived as racist. This was unintentional around us. We want to be inclusive across and consequently had to be addressed our wide customer offering, continue to STANDARDS & POLICIES comprehensively. As a result, we have promote diversity through our marketing increased our emphasis and attention to and campaigns, and contribute to posi- our inclusion and diversity work. Dur- tive social impact through inclusion and ing 2018 we updated our strategy on diversity initiatives where we are present. inclusion and diversity and broadened the scope of our ambitions. We use our Rooted in our values, and through our

size and scale to advance inclusion and global reach, we also want to be advocates REPORT WE HOW diversity towards our customers and the for everyone’s right to be included and communities around us. An important accepted, and to express who they are.

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PROGRESS – INTERNAL has been around for three years and has had the executive management team and the also participated in the Anti-Racism Network • According to our employee survey, 83% a positive impact for all participants. Going CEO, have completed our internal training conference. In the USA, we partnered with VISION & STRATEGY of H&M group employees agree with the forward, we will work to strengthen our programme for inclusion and diversity and Accenture to offer internal training, and put statement ”I feel comfortable being myself social impact measures as well as look into unconscious bias, which covers aspects a Diversity Officer in place to drive our inclu- at work”. 81% of H&M group employees possibilities to scale up. across our value chain. sion and diversity strategy forward. agree with the statement “I am treated with respect and dignity”. • Our initiative to provide safe transport to • In 2018, we initiated a further roll-out of LEARNING – INTERNAL and from work for our female H&M store trainings to reach most of our employees. • During the roll-out of internal training on 100% LEADING THE CHANGE • In 2018, 74% of all H&M group employees employees in India continued. In addition, The training programme aims to ensure inclusion, diversity and unconscious bias, were female and 72% of management posi- we are working with vocational schools, more intentional goal-setting around inclu- we realized there are a lot of learnings for tions were filled by female employees (2017: such as the World Class Skill Centre and sion and diversity throughout the employ- us as an organization. We are a global com- 76%, 72%). Infrastructure Leasing and Financial Services ment lifecycle, and to identify clear action pany but need to adapt to, and address, Skills Development Corporation Limited, and points related to an inclusive customer issues of local relevance. This is why we • Our Board of Directors was represented by NGOs such as the Magic Bus and Oasis, to offer, advancing inclusion and promoting have started to review our policies and a 60%:40% (female:male) gender split. attract and recruit new colleagues from less diversity. processes to further improve an inclusive advantaged socio-economic backgrounds. approach and way of working. A key insight

• Our Internship for Integration programme Approximately 5% of our employees have a • We have worked with different focus mar- from the training on unconscious bias is & RENEWABLE CIRCULAR 100% focuses on providing refugees in Germany, chance to be hired through these partner- kets throughout the year. For example, we that we constantly need to challenge our Sweden and Italy with work experience ships. partnered with the Institute for Justice and perspectives. In 2019, we will continue to opportunities. In 2018, Spain launched a Reconciliation in South Africa to conduct look into how we can effectively measure similar programme. The internship initiative • All our head office functions, including internal training for the ZA organisation. We inclusion and diversity.

5.4. % OF FEMALE EMPLOYEES AT H&M GROUP IN MANAGEMENT POSITIONS 100% FAIR & EQUAL FAIR 100% We commend H&M group for its investment in a series & EQUAL FAIR 100% “of our interventions. The increasing complexity of the issues facing society often make people long for simple 72% 69% 72% 72% answers. However, for H&M group to provide an opportu-

nity for their staff to engage with the issues is aproactive STANDARDS & POLICIES 2015 2016 2017 2018 move to contribute positively, not only to internal company culture and values, but also to building a more cohesive and inclusive society. ” STANLEY HENKEMAN, EXECUTIVE DIRECTOR AT THE

INSTITUTE FOR JUSTICE AND RECONCILIATION IJR REPORT WE HOW IN CAPE TOWN, SOUTH AFRICA

H&M GROUP SUSTAINABILITY REPORT 2018 84 OF 109 OVERVIEW

Advocating for gender equality in Turkey VISION & STRATEGY

Ms. Nur Ger is the founder that we offer to our female of the Suteks group, an H&M employees during pregnancy group supplier since 1982. She and the first period of mother- In a global society, there is still is also the Chair of the Board hood, but also all employees “work to be done to achieve gender

of Suteks group, the Business taking advantage of the oppor- 100% LEADING THE CHANGE Spokesperson for the UN on tunities to keep a good work equality. It is an explicit priority Women�s Empowerment Prin- and family balance in life. Non- ciples (WEPs) and the founding hierarchical management, as for the world, through the sus- President of the Yanindayiz well as the profit share system tainable development goals, and Association. are unique management tools. it is a priority for us. As a large Why is it important for you to How can we advance gender company where the majority of work with gender equality? equality?

I have always cared about par- In my opinion, women’s access people employed by us directly & RENEWABLE CIRCULAR 100% ticipation in civil society activi- to education is one of the ties, as well as business life. As a best ways to eliminate gen- or indirectly are women, we need student and as an entrepreneur, der inequality. As the level of I have experienced various education increases, so does to ensure that we address both difficulties and realized the women’s participation in the structural and unconscious ine- sacrifices that women need to labour force. But gender equal- make in order to succeed in the ity isn’t possible without includ- qualities. We are signatories to business world. This should not ing men. For many years now, be the case, women and men women in this country have the Women’s Empowerment Prin- 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100% should have equal opportunities been alone in their struggle ciples and use these principles to in all aspects of life, at home for women’s rights and social and at work. gender equality. That is why guide our strategy development, I founded Yanindayiz (Stand goals and actions. What kind of role can your By You) together with 40 male business play? members, all advocating for ” SOFIE NYSTRÖM, STRATEGY LEAD

The business world has a great gender equality in Turkey. In INCLUSION AND DIVERSITY, STANDARDS & POLICIES responsibility in this area in order to get changes in the H&M GROUP addition to government policy. laws, institutions and social life, Gender equality is at the very we aim for the better aware- heart of human rights and a ness and active involvement of cornerstone on which I founded men in the struggles against all my company. Suteks is based obstacles and prejudices that on gender equality which not cause gender inequality and HOW WE REPORT WE HOW Nur Ger. only involves the opportunities sexual discrimination.

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PROGRESS – EXTERNAL an unrestricted opportunity to create the inspired by an H&M employee who • Monki HQ was LGBTQ certified by sort of images they wanted to see. survived breast cancer and couldn’t VISION & STRATEGY the Swedish Federation for Lesbian, find affordable and functional under- Gay, Bisexual and Transgender Rights • Weekday collaborated with UNHCR, the garments. H&M created this collection (RFSL). This certification came as a UN Refugee Agency, to create a collec- for her and all those fighting breast result of employee-participation in tion of five original designs that encour- cancer around the world, and to shine workshops held by RFSL that pro- aged action in support of the millions of a light on the social stigma sometimes vided education in norms and the refugees and forcibly displaced persons experienced. In the USA, 100% of sales 100% LEADING THE CHANGE impact they have on the working con- worldwide. The collection’s designs were from the collection was donated to the ditions and health of LGBTQ people. printed on organic cotton t-shirts and American Cancer Society. totes, a belt, a key chain and a porcelain • Monki also entered into a part- coffee cup; 100% of all proceeds (30% of • We continued to support a project nership with Mental Health Europe sales price) was donated to UNHCR. providing equal opportunities for people (MHE), a non-governmental organiza- with disabilities in Indonesia. In this pro- tion committed to the promotion of • H&M launched the first collection of ject, suppliers involved ensure the hiring positive health that works closely with bras for breast cancer survivors. The and accommodation of people with

a large network to end mental health “Close to My Heart” collection was disabilities in supplying factories. & RENEWABLE CIRCULAR 100% Weekday. stigma. Monki and MHE collaboratively launched the Monki campaign, “All the Feels”.

• H&M launched a Pride collection to advocate for equal rights and to cel- ebrate that everyone should be free to love who they want. We donated 10% of the sales from the collection 100% FAIR & EQUAL FAIR 100% to the UN Free & Equal Campaign, & EQUAL FAIR 100% which was set up by the Office of the High Commissioner of Human Rights (OHCHR) and advocates for equal rights and fair treatment for LGBT+ people.

“My body. My image.” Weekday. STANDARDS & POLICIES • Weekday launched a swimwear collection and accompanying campaign that was created by women for women. “My Body, My Image” was a We want to engage women to take collaborative campaign that invited 25 “control and reflect over how the female women to contribute self-portraits of themselves in one of the brand’s eight body is portrayed in media. new swimwear designs. With com- ” REPORT WE HOW NADINE SCHMIDT, HEAD OF MARKETING AT WEEKDAY plete creative control, the women had “All the feels.” Monki. ON THE CAMPAIGN “MY BODY, MY IMAGE”

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KEY FACTS & FIGURES 2018 / KPIS AND GOALS / 100% FAIR & EQUAL EXPLAINED / FAIR JOBS FOR ALL / ENABLING WELL-FUNCTIONING INDUSTRIAL RELATIONS / SUPPORTING A FAIR LIVING WAGE / ADDRESSING HUMAN RIGHTS ISSUES / INCLUSION & DIVERSITY VISION & STRATEGY 100% LEADING THE CHANGE 100% CIRCULAR & RENEWABLE CIRCULAR 100% 100% FAIR & EQUAL FAIR 100% 100% FAIR & EQUAL FAIR 100%

Participants at TEDx event at Kakuma Refugee Camp.

H&M Foundation supported the world’s first TEDx event at a refugee camp

In June 2018, the Kakuma Refu- empowered refugees can shape a Iran, Kenya, Malaysia, Pakistan, the world’s first TEDx in a refu- Speakers included current and

gee Camp in the north of Kenya peaceful and tolerant future. Rwanda, Sudan, South Sudan, gee camp, we want to highlight former Kakuma Camp refugees. STANDARDS & POLICIES hosted the world’s first TEDx Syria, Uganda and Yemen. perspectives and stories from Pur Biel spoke about growing up event in a refugee camp. The The TEDx was part of a 30 million people with their own experience in Kakuma Camp and competing theme was “Thrive” and it focused SEK collaboration between UNHCR “H&M Foundation wants to of being on the run. It is crucial to at the 2016 Summer Olympics as on life as a refugee away from the and H&M Foundation. The pro- contribute to positive change counter prejudice and contribute a member of the first ever Refu- image of suffering, and towards ject’s main focus is supporting for refugees, and we do this by to important knowledge, needed gee Olympic Team. Halima Aden stories of resilience, contribution half a million refugee children with supporting UNHCR efforts in now more than ever,” says Diana spoke about her journey from a and creativity. The event was a the school supplies they need to many different countries. By also Amini, Global Manager at H&M childhood in Kakuma Camp to powerful demonstration of how attend school in Chad, Ethiopia, supporting the arrangement of Foundation. becoming a supermodel. REPORT WE HOW

H&M GROUP SUSTAINABILITY REPORT 2018 87 OF 109 OVERVIEW VISION & STRATEGY 100% LEADING THE CHANGE

STANDARDS & RENEWABLE CIRCULAR 100%

& POLICIES & EQUAL FAIR 100% STANDARDS & POLICIES STANDARDS & POLICIES HOW WE REPORT WE HOW

Monki.

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KEY FACTS & FIGURES 2018 / STANDARDS & POLICIES EXPLAINED / WORKING WITH STANDARDS & POLICIES / OUR HUMAN RIGHTS POLICY / OUR SALIENT HUMAN RIGHTS ISSUES / POLICIES WITHIN OUR OWN OPERATIONS / POLICIES FOR OUR BUSINESS PARTNERS / PRODUCTS & MATERIALS POLICIES

Key facts & figures 2018 VISION & STRATEGY 100% LEADING THE CHANGE

We launched an After completing 9,715 updated version of the safety and security audits Animal Welfare and in our stores, we reached Material Ethics policy.

a worldwide compliance & RENEWABLE CIRCULAR 100% level of 85%.

We measured the sustainability performance of our tier 1 and tier 2 supplier factories & EQUAL FAIR 100% by conducting 884 100% We have rolled out a new desktop validations of our suppliers standard for Sustainable and 1,430 onsite have signed our Workplace, which addresses

validations. Code of Ethics. everything from reducing waste STANDARDS & POLICIES STANDARDS & POLICIES to using LED lights. The standard makes sustainability part of our daily working lives and helps us 100% of our suppliers have signed set a good example across our our Sustainability Commitment. business and beyond. HOW WE REPORT WE HOW

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Standards & policies explained VISION & STRATEGY 100% LEADING THE CHANGE

Our standards and policies are critical to achieving our sustainability vision and goals. Our values are essential for Our sustainability * us – they define who we are and what we stand for. We use standards and policies our standards and policies to integrate and implement these values for all our employees and business partners. HUMAN RIGHTS POLICY 100% CIRCULAR & RENEWABLE CIRCULAR 100% Where applicable, we base our policies and standards on international norms and well-recognised initiatives. Among others, these include ILO Con- H&M GROUP ventions and the UN Guiding Princi- ples on Business and Human Rights.

We group our standards into three categories: OUR OWN OUR BUSINESS OUR MATERIALS/ OPERATIONS PARTNERS PRODUCTS & EQUAL FAIR 100% • our own operations Code of Ethics Code of Ethics Animal welfare and • our business partners material ethics policy • our materials/products Global security policy Sustainability Commitment Chemicals policy Our human rights policy sits above Whistleblowing policy

these categories and applies to all Child labour policy Food policy STANDARDS & POLICIES STANDARDS & POLICIES Global social policies areas of our work. In this chapter, we Home working policy will show you how we implement our Tax policy standards and policies along our value chain, and how we assess and mon- Sustainable Workplace itor them to ensure compliance and Standard improvement. HOW WE REPORT WE HOW

& Other Stories. *A list of our policies can be found at sustainability.hm.com.

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Working with standards & policies VISION & STRATEGY 100% LEADING THE CHANGE

Our business is always changing, with and policies, together with a strategy to same steps: we identify, we address, we experience, and external sources such new needs, risks and opportunities implement and evaluate it. implement,Our evaluate sustainability and report. standardsas the Maplecroft and Countrypolicies Risk* Tool and arising all the time. Sometimes this is a the Transparency International Percep- result of external factors, such as explor- Our standards and policies are part of 1. WE IDENTIFY tion Index. ing a new business model; sometimes it our change-making programme and We identify new risks and opportunities comes from within our business, such as are an essential component in turning by looking at our key long-term sustain- We use the results of this mapping to setting a new sustainability goal. We are our strategy into action and making our ability needs and conducting in-depth identify high-risk countries and to allocate

aware of changes and respond appropri- vision a reality. assessments of our own and our business our resources in the best way. We have a & RENEWABLE CIRCULAR 100% ately. When we become aware of a new partners’ operations. We use both inter- zero-tolerance policy for corruption. need, risk or opportunity, we address it To ensure we work with the correct nal and external assessment tools. Three through a range of different actions. One standard and policy for the given need, focus areas require particular attention: 2. WE ADDRESS action is to create a new set of standards risk or opportunity we always apply the Having identified a new need, risk or Human rights To respect human rights opportunity, we use a framework to throughout our value chain, we require address it in the best possible way. For ongoing due diligence processes. We con- risks, this means prevention, mitigation tinuously work to ensure human rights are and remediation. The framework is either an integral part of all relevant processes. prescribed by an existing standard or pol- 100% FAIR & EQUAL FAIR 100% Our processes help us identify risks and icy, or is developed along with a new and impacts, and address them effectively. more suitable standard or policy.

Environment We make sure to conduct 3. WE IMPLEMENT, daily assessments on water, chemicals, EVALUATE & REPORT climate change, biodiversity and animal We use a tailored strategy to implement

welfare as part of our basic risk manage- the standard or policy that addresses STANDARDS & POLICIES STANDARDS & POLICIES ment operations. the need, risk or opportunity we have identified. We track and evaluate this Corruption We assess levels of risk for implementation to gain insight on how corruption according to country, indus- we can further strengthen and improve try and position/function. Once we know our programmes. We report our progress the level of risk, we set short and long- and findings to internal and external terms goals for mitigation. Every year, we stakeholders through continuous dia- map our biggest corruption risks using a logues, public communication channels REPORT WE HOW combination of our own assessments and and regular reports.

H&M GROUP SUSTAINABILITY REPORT 2018 91 OF 109 OVERVIEW

Our human rights policy VISION & STRATEGY 100% LEADING THE CHANGE

Respect for human rights is funda- • Identifying and addressing salient TRAINING take a stand. For example, in Myan- human rights issues. We provide ongoing in-depth training mar, when the military-led operations mental to any successful business. across our business to raise aware- in northern Rakhine intensified in As our human rights policy states, we • Annual sustainability risk assess- ness and competence in human rights 2017, H&M group and other brands work to integrate this respect across ments, conducted by all functions issues. We customise our training to used their leverage to express con- within the business. suit different functions and roles, but cerns to the government on a number all operations and relevant activities. it all covers the following: of occasions, increasingly so after the

To do this, we must both understand • Business partner due diligence UN Fact Finding Mission was released & RENEWABLE CIRCULAR 100% conducted prior to entering a new • A basic introduction to human end of August 2018. EUCham Gar- the risks and impacts on human rights contract. rights. ment Advocacy Group was formed in in our value chain and seek ways to March 2018, and met with ministries • An outline of our responsibilities as in September 2018 to discuss the prevent, mitigate and remediate these • Country sustainability risk assessment for production and retail markets. per the UNGPs. Rakhine situation. Read more on our risks and impacts. advocacy work here and here. • Business partner management • An explanation of how we work with HUMAN RIGHTS DUE DILIGENCE follow-up through SIPP (Sustainable human rights due diligence and how Our human rights due diligence is an ongoing pro- Impact Partnership Programme). we address situations that may have 100% FAIR & EQUAL FAIR 100% cess that monitors the practice of and respect for a human rights impact. human rights throughout H&M group. We conduct • Human rights due diligence process this due diligence systematically during relevant in production markets. INCIDENT MANAGEMENT assessment processes including, for example, risk We have specific policies and stand- management processes, business partner due dili- • Material/process/product risk ards to help prevent human rights gence, stakeholder engagement, grievance handling assessments. impacts from occurring. Despite this, and all internal training. Each assessment process incidents may still arise that we need STANDARDS & POLICIES STANDARDS & POLICIES contains a clear component that enables us to iden- • Incident-handling routines with to address and resolve. If an incident tify, address and report on any risks or impacts that integrated analysis according to the should occur within the factory walls, relate to human rights. UN Guiding Principles (UNGPs). our Sustainability Commitment and Minimum Requirements apply. This HUMAN RIGHTS MANAGEMENT • In-depth training on UNGPs and is handled in accordance with our Our human rights due diligence serves as the basis our Human Rights Policy. set routines. However, when human for implementing our human rights management. rights violations occur in a country The main processes and activities connected to our • Continuous stakeholder engagement but not directly linked to textile REPORT WE HOW human rights management include: at global and local levels. industry, we as a company need to to Monki.

H&M GROUP SUSTAINABILITY REPORT 2018 92 OF 109 OVERVIEW

Our salient human rights issues VISION & STRATEGY 100% LEADING THE CHANGE

We conducted a thorough process to iden- PROGRESS tify our salient human rights issues in • Having increased our knowledge of 2015. Salient human rights issues are the the UN Guiding Principles and how human rights at risk of the most severe to approach them, we will update our negative impact because of our operations Human Rights Policy during 2019. and supply chain. This process supple- ments our materiality analysis in the area • We assessed human rights issues for of human rights, with an understanding all our production countries to inform & RENEWABLE CIRCULAR 100% of risk to people. our prioritisation going forward. Actions on identified issues can be found on Besides guiding us on the human rights page 80. issues relevant to report according to the UNGP’s Reporting Framework, the process • We see a trend where the migrant work- also informs our strategies and works to force is growing, contributing to a higher address these issues going forward. To risk for forced labour in several areas of ensure our list of salient human rights our value chain. Alongside our ongoing issues remains relevant, we will review work with our manufacturing partners, Afound. 100% FAIR & EQUAL FAIR 100% these issues annually. The full process, we’ve initiated a review of how we work including input from external stake with human rights issues in our logistics holders, will be conducted approximately operations, as well as construction and every three years, or more frequently if facility management services. This will necessary. While we take steps to mitigate ensure that we can better identify and all risks, salience guides us in what to address human rights risks related to, for focus on within human rights and hence example, forced labour. STANDARDS & POLICIES STANDARDS & POLICIES informs our strategies and work. • We fine-tuned the Human Rights due Consequently the most recent review diligence processes for our main produc- took place in 2017, and resulted in slightly tion markets. adjusted definitions on, for example Child Labour changed to Child Rights. • We trained staff from the Legal department, as well as Expansion functions, coun- Here is the full list of our Salient Human try managers and functions� sustainability REPORT WE HOW Rights issues. managers on the risk assessment process. H&M.

H&M GROUP SUSTAINABILITY REPORT 2018 93 OF 109 OVERVIEW

Policies within our own operations VISION & STRATEGY 100% LEADING THE CHANGE

CODE OF ETHICS We follow up on all reported incidents reported by H&M group employees confi- TAX POLICY (FOR H&M GROUP EMPLOYEES) or suspicions of violation. Our Security dentially without any risk of reprisal. H&M group works in accordance with Working in an ethical manner is an department conducts the investigations the tax laws and regulations set by each important part of our business. H&M and consequences can vary from a warn- GLOBAL SOCIAL POLICIES and every country in which our business group conducts business based on the ing to termination of employment. Our business is global and has a grow- operates. principles of honesty, integrity, transpar- ing presence in many markets around ency and fair play. We have developed a Every six months, our Head of Security the world. We are expanding rapidly, See the full list of our policies on

Code of Ethics to make sure our employ- reports on the number of breaches and which means a lot of new recruits. We sustainability.hm.com. & RENEWABLE CIRCULAR 100% ees know and practice these values. This case progress to the Board. We analyse recognise that our success depends on code has a zero tolerance for bribery and cases to help us further improve our our people, so we take care to implement PROGRESS corruptive practices and can be read in risk mapping for the future. We report and improve our social policies. These • In 2018 we rolled out a new Sustainable full on sustainability.hm.com. the number of cases in our Annual include our global policy on inclusion, Workplace Standard (SWS), which states Report and our Sustainability Report. diversity and equality, and our global a minimum level of sustainability require- The Code of Ethics is the same in all non-discrimination harassment policy, ments ensuring colleagues are working in markets and we have translated it into GLOBAL SECURITY POLICY labour relations policy and grievance sustainably functioning workplaces. The all languages spoken at H&M group. All It is our responsibility to make sure our policy, all of which are founded on our SWS also describes an aspirational level employees are required to sign the Code customers and colleagues feel safe. We respect for human rights and on UN and of performance, designed to encourage 100% FAIR & EQUAL FAIR 100% of Ethics and receive practical training conduct an annual store audit con- ILO conventions, amongst others. colleagues to tailor further sustainable on how to act, and how to talk about and sisting of safety, loss prevention and adaptations in their workplaces. report violations. They will also learn information security. We have iden- Our social policies set our minimum about our whistleblowing procedure, tified employee training, as the area expectations and complement our • In 2018, our goal for the global store through which potential breaches can be with most opportunity to improve our company values. They contain clear audit was 90% compliance. We com- reported confidentially without any risk compliance rates. Training our employ- directions that help managers and pleted 9,715 store audits and achieved of reprisal. ees includes how to work safely, prevent employees to meet daily business needs, 85% compliance, where the safety area STANDARDS & POLICIES STANDARDS & POLICIES loss and comply with local legal safety understand how to work and act towards result of the global store audit was 87% Our security, IT and expansion func- training demand. We are working with business partners, and create fair and compliance across all stores and brands. tions, along with several others, conduct HR to increase the safety and security equal working conditions in safe and In 2019 we’re aiming to be 90% with the internal audits of their department’s awareness amongst our people through healthy workplaces. Our social policies e-learning security-awareness training. routines and policies. These audits trainings. are global and set the minimum stand- include an analysis of how the Code of ard regardless of local legislation where Ethics is being implemented. We also WHISTLEBLOWING POLICY we operate. Our guiding principle is to conduct random assessments on specifi- We have a whistleblowing procedure in use whatever gives the greatest protec- REPORT WE HOW cally risky markets or positions. place so that potential breaches can be tion for all colleagues.

H&M GROUP SUSTAINABILITY REPORT 2018 94 OF 109 OVERVIEW

Policies for our business partners VISION & STRATEGY 100% LEADING THE CHANGE

In order to be an H&M group business a firm line on bribery will encourage Commitment. The Sustainability Com- partner, all new (and existing) business others in our markets to share our values. mitment summarises the areas we are How we assess our partners must sign and comply with our We focus our efforts on high-risk coun- working on to make our supply chain policies. Two of our most crucial policies tries, such as Cambodia, Bangladesh, more sustainable. The three major focus suppliers’ performance are our Code of Ethics and our Sustaina- India, and Russia, by providing training areas are healthy workplaces, healthy beyond compliance bility Commitment. and awareness-building activities to both ecosystems and animal welfare. The Sus- employees and business partners. tainability Commitment also describes 1. Self or joint assessment within

CODE OF ETHICS how we work with our suppliers to create agreed timeline & RENEWABLE CIRCULAR 100% (FOR OUR BUSINESS PARTNERS) We provide all our new commercial progress in these areas. 2. Validation of self-assessment via We set an expectation of mutual trust suppliers with face-to-face training desktop and/or onsite review and transparency in all our business on our CoE. This training is focused on We use a performance evaluation (see partner relationships. We underpin this our zero tolerance of bribery and cor- “How we assess our suppliers’ perfor- 3. Sustainability index score (incl. Higg expectation with our Code of Ethics ruption, gifts and hospitality, and on our mance beyond compliance”) to identify facility score and additional own criteria) (CoE) and by building awareness, provid- position on confidential information and and reward those partners that commit ing education and maintaining a strict compliance. to and meet the aspirations. 4. Supplier ownership and capacity no-gift policy. building based on strengths and SUSTAINABILITY COMMITMENT ASSESSING OUR SUPPLIERS weaknesses 100% FAIR & EQUAL FAIR 100% We define business partners as any We launched our Sustainability COMPLIANCE AND PERFORMANCE 5. Monitor progress through annual business that supplies us with goods and/ Commitment in 2016; it replaced our Code SIPP is our Sustainable Impact Partner- SIPP cycle (i.e. repeat from step 1 or services, acts on behalf of our busi- of Conduct, which had been in place since ship Programme, and it applies to our above) ness or collaborates with us. That means 1997. It outlines our basic requirements suppliers. We use SIPP to assess levels business partners include suppliers (com- for all H&M group’s suppliers for commer- of compliance with the Sustainability mercial and non-commercial), vendors, cial goods and frames a long-term aspi- Commitment and to further measure our consultants, landlords, agents, service rational level of performance we expect suppliers’ performance over time and STANDARDS & POLICIES STANDARDS & POLICIES providers, and organisations. Our biggest them to aim for. We want our suppliers to drive constant improvements beyond group of business partners is our com- take this ownership of their sustainabil- compliance. SIPP consists of five major mercial goods suppliers; 100% of them ity performance because we believe it is components: minimum requirements have signed our CoE. the best way to achieve long-lasting and verification, self-assessment, validation, sustainable change. capacity building and case handling. We will always address any kind of bribery (including facilitation payments), and Any suppliers that want to start or this may result in terminating a business continue working with any H&M group REPORT WE HOW relationship. We believe that taking such brand must sign the Sustainability

H&M GROUP SUSTAINABILITY REPORT 2018 95 OF 109 OVERVIEW

6.1. H&M GROUP SUPPLIER FACTORY

HIGG FEM SCORE* VISION & STRATEGY 40 Becoming an H&M Group business partner for commercial goods

New supplier Minimum New Supplier signs our Minimum New supplier Regular supplier requirements performance

identified Code requirements signs our 100% LEADING THE CHANGE checks needed of Ethics met Sustainability assessments performed Commitment begin* 23

19 Minimum requirements not met Full-day sustainability training on our: 2014 2015 2016 2017 Relationship terminated • policies & RENEWABLE CIRCULAR 100% *Scores 2014, 2015 and 2016 follow the SAC/Higg FEM 2.0 • requirements module. Score 2017 follows the SAC/Higg FEM 3.0 and is • issues preliminary, pending SAC correction of a limited but known End score calculation malfunction. Data is self reported and *Learn more about how we assess our business • processes covers tier 1 and tier 2 factories in the apparel and footwear partners’ performance on page 95. supply chain with more than 25 employees.

MINIMUM REQUIREMENTS SELF-ASSESSMENT zero and 100, which we assign based on 2015 (who base their self-assessment on Before starting any working relation- We empower our suppliers to use their the Higg Facility Modules and our own the previous year’s data) and by 2018 it ship with a supplier, we conduct an initiative to further their sustainabil ity criteria. was rolled out to 100% of tier 1* and tier 2

“entry level minimum requirement ver- credentials. Once our suppliers have factories representing 65% of our products & EQUAL FAIR 100% ification”. All suppliers must pass the passed our initial minimum requirement We were one of the first brands to incor- in 2018. The SAC which owns the tool has verification to begin working with us. verification, we provide them with the porate the Higg Facility Modules (both developed the content over the years, so (See Becoming an H&M group business training and tools to self-report their sus- environmental and social) into our supply the comparability over time is not perfect. partner for commercial goods illustra- tainability credentials and performance chain sustainability programme. The However, we still want to share the jour- tion). Within the apparel and footwear on an ongoing basis. main advantage of the Higg facility scores ney of the supplier factories using the Higg supply chain an additional, “basic is that all brands can use them, so suppli- FEM (see graph 6.1.). The Facility Social level” is required in order to begin We assess our partners’ capacity to man- ers only need to complete one assessment and Labor Module has been under devel- STANDARDS & POLICIES STANDARDS & POLICIES working together. Other supply chains age their sustainability issues and track rather than several brand-specific ones. As opment for years and will be launched by are permitted an agreed timeline (max- their performance. This component of a result, factory assessments are fairer and SAC for the 2019 reporting cycle. imum 18 months) in order to fulfill SIPP is closely linked to the evaluation more comparable, regardless of the brand. the basic level. We also have ongoing methodology of the Sustainable Apparel So far we are the only brand disclosing our minimum requirement checks and in Coalition’s (SAC) Higg Facility Modules, Manufacturers use the Higg Facility results, but we hope our industry peers 2018 performed 2,223 across our tier 1 part of the Higg Index suite of tools. Environmental Module (Higg FEM) to will follow. To learn more about the Higg and among our tier 2 suppliers. Please The results of this SIPP assessment are measure the environmental performance facility modules, visit SAC’s webpage. HOW WE REPORT WE HOW see more on minimum requirements captured in our Sustainability Index of their facilities. Higg FEM began being *Factories in the apparel and footwear supply chain, verification findings on page 97. (SI). This index has a score of between used by all our tier 1 apparel suppliers in with more than 25 employees.

H&M GROUP SUSTAINABILITY REPORT 2018 96 OF 109 OVERVIEW

VALIDATION CAPACITY BUILDING ones. This consistent presence helps us recent years. As a result of expanding our Our suppliers self-report through SIPP We use the validated assessments of our build long-term and mutually rewarding scope, we have seen an increase in the VISION & STRATEGY and we validate the results. We deter- suppliers’ sustainability performance partnerships. number of violations. All these cases have mine what level of validation is appro- to identify their strengths and weak- been resolved according to our standards priate for each factory based on their nesses. We use this information to ask Our capacity-building programme is a tool and policies, with a total of 108 Letters of history, overall performance and risk our suppliers to set their goals and act to support our suppliers in different focus Concern sent. We had 0 terminations of assessments, among other indicators. We to strengthen their capacity to better areas, such as industrial relations, clean business relations with our factories.

perform an onsite check at least once a manage their sustainability performance. water, climate neutral supply chain, etc. 100% LEADING THE CHANGE year for all new and high risk suppliers. We work with our partners to identify Read more about our capacity-building PROGRESS We may use desktop validation (checking areas where H&M group can best provide programmes on pages 46, 58 and 68. • 100% of our suppliers have signed data and paperwork for anomalies and support through capacity-building work- our Code of Ethics and Sustainability inconsistencies) if the supplier is low risk. shops, training and management systems CASE HANDLING Commitment. analysis. We also build connections If we learn about a problem or incident We encourage our suppliers to set their between our suppliers and other func- linked to a supplier, our sustainability • We performed 2,223 minimum require- own goals, priorities and focus areas. We tions at our production offices, such as team will log the case and investigate. ments verifications across tier 1 and tier 2 reward those who set ambitious goals our merchandising and quality depart- Cases cover a broad range of issues and suppliers. and maintain good performance, which ments. We use these connections to can concern anything from a specific & RENEWABLE CIRCULAR 100% incentivises our suppliers to improve encourage our suppliers to develop their facility to a regional natural disaster. If we • The self-assessment component of SIPP their sustainability performance. These own strategies and solutions to chal- have a confirmed case of non-compliance has been improved with the new 3.0 ver- rewards include long-term business com- lenges, as well as providing incentives to towards our minimum requirements by a sion of SAC’s Facility Environment Module mitments and growth opportunities. shift impacts from negative to positive supplier, we send a Letter of Concern, and Higg FEM. With contributions from H&M further action depends on the number and group, the methodology has upgraded kind of violation. We require a corrective content and a more customized question- action plan to be submitted by the relevant naire leading to fairer scoring. This year we supplier, which we must approve before released the first Supplier Environmental any further business is conducted. At this Performance Score and for 2017 our score & EQUAL FAIR 100% stage, we evaluate if the supplier involved is 40 (2016: 37). See graph 6.1. on page 96 is the right type of partner for H&M group. for historic data and reporting boundaries. If we decide it is not, we phase them out and cease conducting business with them. • We continued to align SIPP and industry standards and tools by piloting the During previous years, we have seen the assessment framework of the Social year-on-year decline continuing in what STANDARDS & POLICIES STANDARDS & POLICIES Labour Convergence Project. we call “business practice” violations, such as use of child labour (read more on page • We investigated and closed 47 inci- 80 on one remediated case for 2018) or any dents* of potential non-compliance with lack of transparency on the part of a sup- the Code of Ethics (2017: 41, 2016: 39). plier. Among our tier 1 suppliers non-com- These investigations led to terminations pliance against our social and environmen- or written warnings to employees or busi- tal minimum requirements has remained

ness partners in 12 cases. REPORT WE HOW at a consistent level, despite expanding and H&M Home. *Please find an independent assurance statement related to strengthening these requirements over GRI standard disclosure 205-3 on page 106.

H&M GROUP SUSTAINABILITY REPORT 2018 97 OF 109 OVERVIEW

Products & materials policies VISION & STRATEGY 100% LEADING THE CHANGE

H&M group’s standards and policies We also support the use of recycled chemical management on page 42. cover both our operations (ours and animal fibres, as well as innovative and We require all our suppliers to take our suppliers’), and our products and more sustainable materials that offer responsibility for their own chemical materials. When our suppliers sign our the same qualities but are from non- management and we monitor compli- Sustainability Commitment, they are animal origin. ance via a series of self-assessment also legally agreeing to comply with our processes. Suppliers send samples Animal Welfare and Material Ethics For a full list of our animal welfare poli- for third-party testing and the test

policy, and our Chemical Restrictions cies please visit sustainability.hm.com. results are submitted to H&M group & RENEWABLE CIRCULAR 100% policy. for review and final approval. We also PROGRESS conduct dedicated chemical audits at ANIMAL WELFARE AND • We launched a new updated version our suppliers’ factories and work with

MATERIAL ETHICS POLICY of the Animal Welfare and Material H&M. experts and our suppliers to promote Securing our supply of raw materials Ethics policy at end of 2018. better chemical management practice ethically is very important and we are throughout our industry. committed to ensuring that the natural CHEMICAL RESTRICTIONS minimum, our chemical restrictions raw materials used in our products are To ensure the ongoing safety of our are based on laws and regulations in PROGRESS produced in a way that respects human products and to limit negative impacts each of our sales markets, as well as • Together with our suppliers, we have 100% FAIR & EQUAL FAIR 100% rights and animal welfare, preserves on the environment and surrounding up-to-date information from author- conducted 48,700 chemical tests to natural resources and helps maintain communities, we implement a strict ities, NGOs and scientific reports. We ensure compliance with our Restricted biodiversity. global chemical management pro- apply the precautionary principle, Substances List. gramme and work towards alignment which means we preventively restrict We define our standards on responsible across our industry. Our vision is to chemicals even where there is sci- • We have invested in the train-the- sourcing in our Animal Welfare and lead the change towards safe products entific uncertainty. Accordingly, our trainer programme based on Best

Material Ethics Policy, as well as setting and a toxic-free fashion future. Our requirements usually go further than Chemical Management Practice STANDARDS & POLICIES STANDARDS & POLICIES our long-term direction in line with our key goal is to achieve zero discharge of the law demands. In 2018, we adopted (BCMP) to implement cleaner pro- goal for 100% recycled or other sustaina- hazardous chemicals throughout our Screened Chemistry to enable us to duction. Our BCMP guidelines help bly sourced materials by 2030. supply chain by 2020. select the best available chemicals for our suppliers to minimise the use of our production. Screened Chemistry hazardous chemicals by developing a We aim to have all our virgin animal- H&M group’s Chemical Restrictions goes beyond Restricted Substance List strong chemical management system. derived materials coming from farms List bans and/or limits any chemi- /Manufacturing Restricted Substance BCMP is also closely linked to the new that are certified to a credible cals that are considered hazardous. List chemicals and identifies best-in- Higg FEM 3.0, ensuring that chemical animal welfare standard and are It is mandatory for all our suppliers class chemicals and safer alternatives. performance is captured in suppliers’ REPORT WE HOW fully traceable. to comply with our restrictions. As a Please see more information about overall evaluation.

H&M GROUP SUSTAINABILITY REPORT 2018 98 OF 109 OVERVIEW VISION & STRATEGY 100% LEADING THE CHANGE 100% CIRCULAR & RENEWABLE 100% FAIR & EQUAL STANDARDS & POLICIES HOW WE REPORT HOW WE REPORT 99 OF 108 H&M Home. H&M

REPORT HOW WE HOW H&M GROUP SUSTAINABILITY REPORT 2018 2018 REPORT REPORT SUSTAINABILITY SUSTAINABILITY GROUP GROUP H&M H&M OVERVIEW

HOW WE REPORT / MATERIALITY MATRIX / UN’S SUSTAINABLE DEVELOPMENT GOALS / KEY COLLABORATIONS / AUDITOR’S REPORT / GET IN TOUCH

How we report VISION & STRATEGY 100% LEADING THE CHANGE

We are committed to transparent Unless otherwise stated, we do not cover col, the emission factors we use are from franchise operations. The report has publicly-available sources such as the reporting on the progress we been reviewed by the highest executive International Energy Agency (IEA 2017), make towards achieving our management and external assurance has the Network for Transport Measures sustainability strategy. been performed for selected indicators (NTM), Reliable Disclosure System for (clearly marked where applicable, as well Europe (RE-DISS) and supplier-specified H&M group produces an annual sus- as in regards to materiality and stake- emission factors. The global warming

tainability report that covers sustaina- holder engagement). We have included potential (GWP) factors used in the cal- & RENEWABLE CIRCULAR 100% bility strategies, challenges, activities, stakeholder comments and interviews culation of CO₂e are based on the IPCCs goals and performance for the global throughout this report. Fourth Assessment Report (AR4) over a group operations of H & M Hennes & 100-year period. Mauritz AB (also called H&M group in Our sustainability teams collect data this report). The report includes all H&M from the relevant functions within H&M The scientific knowledge used to deter- group brands (H&M, COS, Weekday, group and from external parties such as mine emission factors is incomplete. This Cheap Monday, Monki, H&M Home, & suppliers or implementation partners. means GHG emission data, as with other Other Stories, ARKET, Afound), as well This data is always reviewed by our inter- data, is subject to inherent uncertainties as its wholly- or partially-owned subsid- nal controlling team, relevant experts in that ultimately affect all measurements H&M Conscious Exclusive. & EQUAL FAIR 100% iaries globally during our financial year our sustainability team and expert func- and estimations. Our reported energy from 1 December 2017 to 30 November tions following a two-tier quality control usage is based on invoiced data, data 2018 unless stated otherwise. Please see principle. We clearly indicate any extrap- from real-time electricity meters and data data systems and accuracy to report on our Annual Report 2018 for a full list olations or estimations. The same rule as reported by transport providers. We material consumption. of entities. applies for any changes in data method- convert between fuel usage and energy ologies or scopes that may influence data content using energy values specified by Unless otherwise specified, all data con-

Wherever possible, we report how we are comparability. We always base our data the supplier or by using tabled values cerning business partners and supplier STANDARDS & POLICIES addressing our key positive and negative on the best possible systems that are cur- provided by national bodies. factories includes all suppliers and fac- impacts across our value chain. This rently available to us and, where applica- tories that were active and approved for often involves reporting beyond or even ble, align it with recognised standards. We are required to make certain assump- production during the reporting period. outside our own operations, for example However, it is important to understand tions about waste factors, weight per We include the following factories in our when we report on the suppliers manu- that there are continued improvements sizes, etc. for our material reporting. We scope: tier 1 manufacturing or processing facturing our products. We always clearly in data systems, methodologies and are continuously working to improve (i.e. washing or dyeing), factories that are state when information is limited in scientific uncertainties. For example, those aspects of reporting that may lead owned or subcontracted by our suppliers scope, such as for specific brands, parts while our GHG emissions accounting and to minor updates in our yearly material and, where stated, selected tier 2 sup- REPORT WE HOW REPORT WE HOW of our operations or our value chain. reporting is aligned with the GHG Proto- consumption reporting, as well as our pliers and suppliers for non-commercial

H&M GROUP SUSTAINABILITY REPORT 2018 100 OF 109 OVERVIEW

HOW WE REPORT / MATERIALITY MATRIX / UN’S SUSTAINABLE DEVELOPMENT GOALS / KEY COLLABORATIONS / AUDITOR’S REPORT / GET IN TOUCH goods (such as store interior suppliers). Guiding Principles Reporting Framework The tier 2 suppliers we have selected so can be found at sustainability.hm.com. VISION & STRATEGY far are mostly fabric and yarn suppli- We identified our salient human rights ers that account for about 60% of our (page 93) in 2015, following a compre- products. We report monetary amounts hensive process that involved a variety mainly in the currency of transaction. of internal and external stakeholders. Additional currency values are conver- We plan to conduct this process every

sions as approximate figures based on the third year, or as deemed necessary. On 100% LEADING THE CHANGE conversion rate on 30 November 2018, an annual basis, we will review the unless stated otherwise. We provide relevance and definitions of the issues additional information at sustainabil- identified and discuss emerging issues. ity.hm.com and in our financial and This complements our materiality assess- corporate governance reporting. Our ment (described below), which identifies most recent sustainability report was human rights as a highly material topic. published in April 2018. We are signatories to the UN Global Compact and our PROCESS FOR IDENTIFYING annual sustainability report also serves THE MOST MATERIAL TOPICS & RENEWABLE CIRCULAR 100% as our Communication on Progress (COP) AND THEIR BOUNDARIES* for the UN Global Compact as well as the 1. Identification: Mapping aspects CEO Water Mandate. and creating a gross list We conduct an annual review of our gross GLOBAL REPORTING INITIATIVE (GRI) list of aspects. This is based on an analy- H&M Beauty. Fabric samples. We have prepared this report in accord- sis of external standards, such as the GRI ance with the GRI Standards: Core Standard topic list, legislation, investor Option. We have also included material and NGO questionnaires, peer reviews, we look at frequency raised by key ees, industry peers, NGOs, IGOs, policy- indicators from the pilot of the Apparel business intelligence, lifecycle assess- defined sustainability stakeholders and makers and investors). We asked eleven 100% FAIR & EQUAL FAIR 100% and Footwear Sector Supplement. You ment results, stakeholder dialogues and experts (weighted x3), frequency featured stakeholder representatives to feedback can download a detailed GRI index at stakeholder reports, and media coverage. in media (weighted x1) and frequency on our materiality matrix. sustainability.hm.com. The gross list has been checked against raised in key sustainability benchmarks, GRI’s Sustainability Context and Stake- rankings and indices (weighted x1). For 3. Regular review of our materiality UN GUIDING PRINCIPLES holder Inclusiveness tests most recently impact, we look at social and environ- matrix with key stakeholders*** REPORTING FRAMEWORK in 2016. mental impacts (weighted x1) and impor- We review our materiality matrix on an

We were one of the first companies in the tance to business strategy (weighted x2). annual basis. This can mean conducting STANDARDS & POLICIES world to report on human rights in line 2. Prioritisation: Scoring At least two internal experts per category a full materiality analysis (as conducted with the UN Guiding Principles Report- and prioritising topics** gave scores, which were based on lifecy- in 2013 and 2016) as described in points ing Framework. This framework is the We prioritise the most material topics cle assessment (LCA) data and existing 1 and 2 or a review of previous year’s first comprehensive guidance for compa- from this gross list by scoring different strategy documents. matrix considering feedback received. nies to report on human rights issues in aspects on their frequency (how often * Please find an independently-verified assurance statement on line with their responsibility to respect they are raised by stakeholders) and their We also chose at least one representative defining report content and topic Boundaries GRI 102-46 on page 106. human rights set out in the UN Guid- significance for economic, environmental from each of our key stakeholder groups ** Please find an independently-verified assurance statement on

list of material topics GRI 102-47 on page 106. REPORT WE HOW REPORT WE HOW ing Principles on Business and Human and social impacts. We then break these (which includes customers, colleagues, *** Please find an independently-verified assurance statement on defining report content and topic Boundaries GRI 102-46 on Rights. Detailed references to the UN categories down further. For frequency, communities, suppliers and their employ- page 106.

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HOW WE REPORT / MATERIALITY MATRIX / UN’S SUSTAINABLE DEVELOPMENT GOALS / KEY COLLABORATIONS / AUDITOR’S REPORT / GET IN TOUCH

REVIEW OF MATERIALITY In 2017 we conducted our first stake- MATRIX IN 2018 holder survey developed with Business VISION & STRATEGY In spring 2017, we launched our updated for Social Responsibility (BSR). The sustainability strategy, developed in survey assesses both the quality of close cooperation with several external our stakeholder engagement work, as and internal key stakeholders, part- well as feedback on our strategy and ners and experts. In connection to this, performance towards it. For this year’s

we arranged a large-scale stakeholder survey, the feedback we received widely 100% LEADING THE CHANGE meeting inviting over 300 represent- confirmed our materiality matrix, atives from our stakeholder commu- with some adjustments made, such as nities to a full day of workshops and an increased focus on inclusion and discussions, including feedback on our diversity. report and the focus areas chosen in our strategy. PROCESS FOR DEFINING OUR SALIENT HUMAN RIGHTS ISSUES We started the process by defining

who we impact through our business & RENEWABLE CIRCULAR 100% activities along our value chain. We paid special attention to those who are potentially more vulnerable and hence are more at risk, such as migrant workers, women and children. This mapping process resulted in a list of both potential and actual human rights impacts. From this list, we identified salient impacts by applying two crite- 100% FAIR & EQUAL FAIR 100% ria: the severity of the potential impact and the likelihood of occurrence.

We then held internal and external consultations about the method and input to the identified salient human

rights issues with almost 100 people. STANDARDS & POLICIES Internally, we conducted workshops and opened dialogues across all levels and functions of our company. Externally, we held consultations with experts, organisations, academia and local stakeholders. We review our salient human rights issues annually and adjust them accordingly. For an update on our salient REPORT WE HOW REPORT WE HOW MoschinoXH&M. human rights issues, read more here. H&M Home.

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Materiality matrix VISION & STRATEGY 100% LEADING THE CHANGE

REPORTED AT LEAST IN NARRATIVE, REPORTED IN DETAIL, WHEREEVER POSSIBLE WITH AMBITION AREAS OUR FOCUS AREAS OUR IDENTIFIED TOPICS BOUNDARIES WHEREVER POSSIBLE WITH MEASURABLE KPI MEASURABLE KPI OR PREFERABLY GOAL, AIM FOR EXTERNAL ASSURANCE WHEREVER USEFUL 100% Design, raw materials, fabric and yarn production, product manufacturing, INNOVATION 1. Innovation transport, sales, use LEADING THE CHANGE DRIVE TRANSPARENCY 2. Drive transparency Product manufacturing, fabric and yarn production

REWARD SUSTAIN- 3. Reward sustainable actions Design, raw materials, fabric and yarn production, product manufacturing, 14 15 ABLE ACTIONS transport, sales, use 18 23 4 4. Recycled and other sustain- Design, raw materials, fabric and yarn production, product manufacturing,

ably sourced materials sales, use & RENEWABLE CIRCULAR 100% 2 1 5. Animal welfare Design, raw materials 13 6 100% 3 CIRCULAR & 6. A circular approach to how Design, raw materials, fabric and yarn production, product manufacturing, 12 RENEWABLE fashion is made and used sales, use 10 100% CIRCULAR 11 16 5 7. Water Design, raw materials, fabric and yarn production, product manufacturing, sales, use

Design, raw materials, fabric and yarn production, product manufacturing, 7 8. Waste transport, sales, use

9. Packaging Product manufacturing, transport, sales, use

10. Chemical management Raw materials, fabric and yarn production, product manufacturing, sales 8 100% RENEWABLE 17 Raw materials, fabric and yarn production, product manufacturing, transport, 11. Climate sales, use 100% FAIR & EQUAL FAIR 100% 20 Raw materials, fabric and yarn production, product manufacturing, transport, 9 12. Fair jobs sales

13. Industrial relations Product manufacturing, sales 24 100% FAIR JOBS FOR ALL FAIR & EQUAL 14. Fair living wages Product manufacturing, sales 22 19 Design, raw materials, fabric and yarn production, product manufacturing, 15. Human rights transport, sales, use 21 16. Inclusion & diversity Design, product manufacturing, transport, sales, use

FREQUENCY RAISED BY STAKEHOLDERS BY RAISED FREQUENCY STEWARDS FOR

DIVERSITY AND STANDARDS & POLICIES INCLUSIVENESS 17. Community development Product manufacturing, sales

18. Supply chain assessments Fabric and yarn production, product manufacturing STANDARDS Raw materials, fabric and yarn production, product manufacturing, transport, & POLICIES 19. Anti-corruption sales

20. Responsible marketing Sales, use

21. Anti-competitive behaviour Fabric and yarn production, product manufacturing, transport, sales

22. Biodiversity Raw materials, fabric and yarn production, product manufacturing NO REPORTING REPORTED AT LEAST IN NARRATIVE, OTHER OR REPORTING ON REQUEST WHEREVER POSSIBLE WITH MEASURABLE KPI IDENTIFIED 23. Economic performance Sales REPORT WE HOW REPORT WE HOW TOPICS 24. Market presence Raw materials, fabric and yarn production, product manufacturing, sales SIGNIFICANCE OF ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS

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UN’s Sustainable Development Goals VISION & STRATEGY 100% LEADING THE CHANGE

The UN’s Sustainability Development Goals (SDGs) and the 2030 Agenda for Sustainable Development call on Our business activities directly contribute governments, business and civil society to take action to to the following SDGs address social and economic challenges. We believe this collaborative approach is essential and, as you can see below, our sustainability strategy aligns well with the SDGs. & RENEWABLE CIRCULAR 100%

CONTRIBUTION THROUGH PARTNERSHIPS 100% LEADING THE CHANGE SDG2 Zero hunger SDG9 — Industry, innovation SDG4 Quality education and infrastructure SDG5 Gender equality SDG12 — Responsible consumption SDG6 Clean water and sanitation and production SDG7 Affordable and clean energy SDG17 — Partnership for SDG8 Decent work and the goals economic growth & EQUAL FAIR 100% SDG9 Industry, innovation and infrastructure SDG10 Reduced inequalities SDG12 Responsible consumption and production 100% CIRCULAR & RENEWABLE 100% FAIR & EQUAL SDG13 Climate action SDG6 — Clean water and sanitation SDG16 Peace, justice and SDG5 — Gender equality STANDARDS & POLICIES strong institutions SDG7 — Affordable and clean energy SDG8 — Decent work and SDG17 Partnership for the goals SDG12 — Responsible consumption economic growth and production SDG10 — Reduced inequalities INDIRECT INFLUENCE AND IMPACT SDG13 — Climate action SDG1 No poverty SDG17 — Partnership for the goals SDG3 Good health and well-being SDG14 — Life below water SDG11 Sustainable cities SDG15 — Life on land

and communities REPORT WE HOW REPORT WE HOW SDG14 Life below water SDG15 Life on land

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Key collaborations VISION & STRATEGY 100% LEADING THE CHANGE

• Accord on Fire and Building Safety • Humane Society International (HSI) • Sweden Textile Water Initiative in Bangladesh (The Accord) (STWI) • I:CO • ACT (Action, Collaboration, • Textile Exchange • IFC Transformation) • The Climate Group (RE100; EP100) • ILO • Afirm Group • The Global Deal • IndustriALL /IF Metall • Amsterdam Coalition (AMCO)

• The Pathway Coalition & RENEWABLE CIRCULAR 100% • Make Fashion Circular • Better Cotton Initiative (BCI) • Transparency International Sweden • Mekong Club • Better Than Cash Alliance (BTCA) • UNDP • Mistra Future Fashion • Better Work • UNFCCC • Network for Civil Rights Defenders • Canopy • UN Global Compact (UNGC) • Network for Transport Measures • CCWG (Clean Cargo Working (NTM) • UNI Global Union Group) • New Plastic Economy Global • WRG

• Chemsec Business Group & EQUAL FAIR 100% Commitment • WWF • Clean Shipping Index (CSI) • Organic Cotton Accelerator (OCA) • Zero Discharge of Hazardous • Cradle to Cradle Products • Responsible Mica Initiative (RMI) Chemicals (ZDHC) Innovation Institute • Shift • Ellen MacArthur Foundation • Sida • Ethical Trading Initiative (ETI) STANDARDS & POLICIES • Social & Labour Convergence • Fair Wage Network (FWN) Project (SLCP) • Global Deal • Solidaridad • Global Fashion Agenda • Stockholm Resilience Centre (SRC) • Global Logistics Emissions Council For more information about the • Sustainable Air Freight Initiative (GLEC) above listed collaborations • Sustainable Apparel Coalition and memberships please visit REPORT WE HOW REPORT WE HOW • Green Freight Asia (GFA) (SAC) sustainability.hm.com. ARKET.

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Auditor’s report VISION & STRATEGY

AUDITOR’S LIMITED ASSURANCE REPORT ON SPECIFIED INFORMATION IN H&M HENNES & MAURITZ AB’S GROUP SUSTAINABILITY REPORT 100% LEADING THE CHANGE

TO H & M HENNES & MAURITZ AB, volume, limited to cotton (Disclosure tors in the H & M Group Sustainability sented information in the H & M Group CORP ID 556042-7220 301-1), p. 39 Report based on the limited assurance Sustainability Report is to be consid- We have been engaged by the management Tons of garments collected for reuse and procedures we have performed. The ered in connection with the explanatory of H & M Hennes & Mauritz AB (H & M) to recycling, p. 50 selection of indicators to be reviewed has information on data collection, consol- perform a limited assurance engagement been made by the management of H & M idation and assessments provided by on the information in H & M’s Group’s Sus- • Anti-corruption: Confirmed incidents Hennes & Mauritz AB. We do not accept, H & M. This independent limited assur- tainability Report 2018 with regards to the of corruption and actions taken (Disclo- nor assume responsibility to anyone ance report should not be used on its

following indicators referred to in the GRI sure 205-3), p. 97 else, except to H & M for our work, for own as a basis for interpreting H & M’s & RENEWABLE CIRCULAR 100% index that can be found in the ‘GRI content the limited assurance report, or for the performance in relation to its principles index 2018’: The H & M Group Sustainability Report conclusion that we have reached. of corporate responsibility. 2018 covers the period 1 December 2017 • Identified material topics and bound – 30 November 2018. We conducted our limited assurance Our review procedures are designed to aries (Disclosures 102-46, 102-47), engagement in accordance with the obtain limited assurance on whether p. 101–103 MANAGEMENT’S RESPONSIBILITY International Standard on Assurance the above specified indicators are The Management of H & M is respon- Engagements (ISAE) 3000 ‘Assurance presented in accordance with the • Stakeholder engagement (Disclosure sible for preparing and presenting the Engagements Other than Audits or Sustainability Reporting Guidelines of 102-40, 102-42, 102-43, 102-44), H & M Group Sustainability Report Reviews of Historical Financial Infor- the Global Reporting Initiative, in all 100% FAIR & EQUAL FAIR 100% p. 17, 101–103 2018 in accordance with the reporting mation’. The ISAE 3000 standard material respects. A limited assurance criteria as set out in the company’s own requires that we comply with ethical engagement consists of making inquir- • Energy: Energy consumption within reporting guidelines as well as the Global requirements and plan and perform the ies, primary of persons responsible for the organization (Disclosure 302-1), p. 55 Reporting Initiative’s (GRI) Standards. assurance engagement to obtain limited the preparation of the H & M Group Energy intensity (Disclosure 302-3), p. 55 As discussed in the section “How we assurance on whether any matters have Sustainability Report and applying Percentage of renewable energy (AF21), p. 57 report”, page 100 in the H & M Group come to our attention that would cause analytical and other evidence gathering

Sustainability Report 2018, greenhouse us to believe that the above specified procedures, as appropriate. The proce- STANDARDS & POLICIES • Emissions: Direct (Scope 1) GHG gas quantification is subject to inher- information in the H & M Group Sus- dures performed in a limited assurance emissions (Disclosure 305-1), p. 54 ent uncertainty because of incomplete tainability Report 2018 has not been engagement vary in nature from, and Energy indirect (Scope 2) GHG emissions scientific knowledge used to determine prepared, in all material respects, in are less in extent than for, a reasonable (Disclosure 305-2), p. 54 emissions factors and the values needed accordance with the reporting criteria. assurance engagement conducted in Other indirect (Scope 3) GHG emissions, to combine emissions of different gases. A limited assurance engagement is accordance with International Stand- limited to transportation (Disclosure 305- provided only on the information dis- ards on Auditing and generally accepted 3), p. 56 AUDITOR’S RESPONSIBILITY closed in the H & M Group Sustainability auditing standards in Sweden. The Our responsibility is to express a con- Report, not on information linked to and procedures performed consequently do REPORT WE HOW REPORT WE HOW • Materials: Materials used by weight or clusion on the above specified indica- disclosed on other web pages. The pre- not enable us to obtain assurance that

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HOW WE REPORT / MATERIALITY MATRIX / UN’S SUSTAINABLE DEVELOPMENT GOALS / KEY COLLABORATIONS / AUDITOR’S REPORT / GET IN TOUCH we would become aware of all signifi- Our procedures are based on the criteria cant matters that might be identified defined by the Management as described VISION & STRATEGY in a reasonable assurance engagement. above. We consider these criteria suita- Accordingly, we do not express a reason- ble for the preparation of the Sustaina- able assurance conclusion. bility Report.

The firm applies ISQC 1 (International We believe that the evidence we have Standard on Quality Control) and obtained is sufficient and appropriate to 100% LEADING THE CHANGE accordingly maintains a comprehensive provide a basis for our conclusion below. system of quality control including docu- mented policies and procedures regard- CONCLUSION ing compliance with ethical require- Based on our work described in this ments, professional standards and report, nothing has come to our atten- applicable legal and regulatory require- tion that causes us to believe that the ments. We are independent of H & M in information regarding the above speci- accordance with professional ethics for fied indicators in the H & M Group Sus-

accountants in Sweden and have other- tainability Report has not, in all material & RENEWABLE CIRCULAR 100% wise fulfilled our ethical responsibilities respects, been prepared in accordance in accordance with these requirements. with the reporting criteria stated above. 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES

H&M.

Stockholm, March 29, 2019 Ernst & Young AB

Åsa Lundvall Charlotte Söderlund REPORT WE HOW REPORT WE HOW Authorized Public Accountant Authorized Public Accountant

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Get in touch VISION & STRATEGY 100% LEADING THE CHANGE

If you have any questions about the report, need help locating specific information or want to find out the latest on our sustainability work including our strategy, goals, standards and policies, please contact:

[email protected] or & RENEWABLE CIRCULAR 100% [email protected]

We appreciate your feedback. 100% FAIR & EQUAL FAIR 100% STANDARDS & POLICIES HOW WE REPORT WE HOW REPORT WE HOW

Monki.

H&M GROUP SUSTAINABILITY REPORT 2018 108 OF 109 THANK YOU