H&M GROUP SUSTAINABILITY REPORT 2017 OVERVIEW OVERVIEW Table of contents STRATEGY & VISION 100% LEADING THE CHANGE THE LEADING 100% 1. OVERVIEW 3 5. 100% FAIR & EQUAL 53 About H&M group 4 Key facts & figures 2017 54 Our value chain 5 KPIs and goals 55 Letter from CEO 6 100% Fair & Equal explained 56 Executive summary 7 Fair jobs for all 57 2. VISION & STRATEGY 9 Stewards for diversity & inclusiveness 68 Our vision & strategy 10 6. STANDARDS & POLICIES 73 100% CIRCULARRENEWABLE & Our ambitions 11 Key facts & figures 2017 74 Our Change-Making Programme 12 Standards & policies explained 75 Engaging our changemakers 13 Working with standards & policies 76 How we are organised 14 Our human rights policy 77 Interview with Head of Sustainability 15 Policies within our own operations 79 3. 100% LEADING THE CHANGE 16 Policies for our business partners 81 Key facts & figures 2017 17 Products & materials policies 85 100% Leading the Change explained 18 7. HOW WE REPORT 87 100% FAIR & EQUAL Innovation 19 How we report 88 Transparency 21 Materiality matrix 90 Rewarding sustainable actions 24 Our salient human rights issues 91 4. 100% CIRCULAR & RENEWABLE 26 UN’s Sustainable Development Goals 93 Key facts & figures 2017 27 Engaging with our stakeholders 94 STANDARDS & POLICIES & STANDARDS KPIs and goals 28 Key collaborations 96 100% Circular & Renewable explained 29 Auditor’s report 97 Becoming 100% circular 30 Get in touch 99 Becoming climate positive 47 HOW WE REPORT H&M. H&M GROUP SUSTAINABILITY REPORT 2017 2 OF 100 OVERVIEW VISION & STRATEGY 100% LEADING THE CHANGE 100% CIRCULAR & RENEWABLE 100% FAIR & EQUAL STANDARDS & POLICIES HOW WE REPORT OVERVIEW H&M. 3 OF 100 OVERVIEW H&M GROUP SUSTAINABILITY REPORT 2017 OVERVIEW OVERVIEW ABOUT H&M GROUP / OUR VALUE CHAIN / LETTER FROM CEO / EXECUTIVE SUMMARY About H&M group STRATEGY & VISION 100% LEADING THE CHANGE THE LEADING 100% H&M group loves fashion and design. We are 2017 FIGURES always working to create the best offering for our customers, in the most sustainable way. SEK 232 billion in H&M group includes eight clearly-defined brands – H&M, COS, Weekday, Cheap Monday, Monki, sales incl. VAT in 2017. H&M Home, & Other Stories and ARKET. Together, our brands offer customers a wealth of styles and 100% CIRCULARRENEWABLE & trends in fashion, beauty, accessories and home- 4,739 stores in ware – as well as healthy, modern food in selected 69 stores. markets and e-commerce in 43 markets. Through our integrated physical stores and digital channels, we reach customers around the world. Our customer proximity is amplified by our 171,000 colleagues globally, operating in both sales and H&M group production markets. welcomed approximately 100% FAIR & EQUAL ABOUT H&M FOUNDATION 10,000 H&M Foundation is a non-profit global foundation, new employees in 2017. privately funded by the Stefan Persson family, founders and main owners of H&M group. The foundation's mission is to drive long lasting positive We have more than POLICIES & STANDARDS change and improve living conditions by investing in people, communities and innovative ideas. Learn more about H&M Foundation’s work on pages 20, 171,000 35 and 72, and read the annual report, A Catalyst colleagues around the world. for Change 2017 at hmfoundation.com H&M. HOW WE REPORT H&M GROUP SUSTAINABILITY REPORT 2017 4 OF 100 OVERVIEW OVERVIEW ABOUT H&M GROUP / OUR VALUE CHAIN / LETTER FROM CEO / EXECUTIVE SUMMARY Our value chain STRATEGY & VISION 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 THE LEADING 100% We create fashion and quality at a great IMPACTS ALONG OUR VALUE CHAIN price in a sustainable way. To do this, Our vast network of value chain con- H&M group is responsible for the effi- nections means that our social, envi- H&M alone has cient and effective running of its own ronmental and economic impacts are In 1947, H&M opened its value chain. Our value chain describes significant and far-reaching. Therefore, first store in Västerås, the full sequence of processes involved to maintain our business idea, we need 800 in the production and lifespan of all to maximise the positive impacts and Sweden. 2017 marked our million customer th 100% CIRCULARRENEWABLE & our products, from product ideation to minimise the negative impacts we have anniversary. transactions per year. customer use and disposal. along our value chain. We achieve this 70 by using our size and scale to leverage But our value chain does not operate and catalyse changes that improve the Our products are made in in isolation. With eight brands, sell- operation of our own value chain as well The supplier factories we ing products in over 4,700 stores, it is as the wider industry. work with employ over connected to countless people, commu- 1,668 nities, ecosystems and other businesses Please see the illustrations below for a 1.6 million people of supplier factories around around the world. more in-depth look at the impacts we have which 62% are women. the world. along our value chain. Please also visit 100% FAIR & EQUAL sustainability.hm.com for further information. STANDARDS & POLICIES & STANDARDS Fabric and yarn Product Design Raw materials production manufacturing Transport Sales Use Medium 2% 0% Low High 0% 0% High Low 21% 8% Medium High 0% 0% Low Medium 9% 87% High Medium 46% 6% High Medium 18% 1% High O U R CLIMATE WATER SOCIAL O U R CLIMATE WATER SOCIAL O U R CLIMATE WATER SOCIAL O U R CLIMATE WATER SOCIAL O U R CLIMATE WATER SOCIAL O U R CLIMATE WATER SOCIAL O U R CLIMATE WATER SOCIAL INFLUENCE I M PACT * I M PACT * IMPACT** INFLUENCE I M PACT * I M PACT * IMPACT** INFLUENCE I M PACT * I M PACT * IMPACT** INFLUENCE I M PACT * I M PACT * IMPACT** INFLUENCE I M PACT * I M PACT * IMPACT** INFLUENCE I M PACT * I M PACT * IMPACT** INFLUENCE I M PACT * I M PACT * IMPACT** HOW WE REPORT *Climate impacts are based on a scope 3 assessment made by Ecofys in 2016, based on 2014 data. Calculations in the footprint analysis are based on a combination of quality H&M group data (2014 material usage) combined with the best available public data sources on CO 2 emissions. We are working to further improve the calculations by using primary data from our main suppliers. The water footprint is based on the Water Footprint Network’s methodology and includes green, blue and grey water footprints. Deviation from 100% due to rounding effects.**For more information about our social impacts, see pg 92. A number of these issues related also to H&M group’s salient 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 2017 5 OF 100 OVERVIEW OVERVIEW ABOUT H&M GROUP / OUR VALUE CHAIN / LETTER FROM CEO / EXECUTIVE SUMMARY Letter from CEO STRATEGY & VISION 100% LEADING THE CHANGE THE LEADING 100% 100% CIRCULARRENEWABLE & We believe sustainable fashion and design should This report presents the H&M group’s be available to everyone, not only to a privileged achievements and progress within few. Since my grandfather founded the company the sustainability field over the 70 years ago we have had a long-term perspective. past year. There are still challenges ahead, but I am proud of what we To secure future business it is essential and natu- have achieved so far and the positive ral for us to address sustainability proactively. impact we are making. We are dedicated to continue making great fash- 100% FAIR & EQUAL ion and design affordable, by having a circular approach and being a fair and equal company. Thanks to our size and to our committed colleagues, H&M group is fit to lead the change towards a more sustainable fashion future. How- ever, this is not a task that we can manage on our POLICIES & STANDARDS own; collaboration, new-ways of working and joint industry goals are key for accelerating the changes and results needed. Our continued commitment to the United Nations Global Compact and our ongoing collaborative work with stakeholders, including local and global experts and NGOs, are a few examples of how we work to achieve positive Karl-Johan Persson, CEO HOW WE REPORT Karl-Johan Persson, CEO. change through shared responsibility. H & M Hennes & Mauritz AB H&M GROUP SUSTAINABILITY REPORT 2017 6 OF 100 OVERVIEW OVERVIEW ABOUT H&M GROUP / OUR VALUE CHAIN / LETTER FROM CEO / EXECUTIVE SUMMARY Executive summary STRATEGY & VISION 100% LEADING THE CHANGE THE LEADING 100% We believe that sustainable fashion and KEY 2017 ACHIEVEMENTS design should be available to everyone today, INNOVATION IS THE KEY TO ACHIEVING BY 2030, WE WILL ONLY FULL CIRCULARITY. THAT’S WHY WE USE 100% RECYCLED OR tomorrow and for generations to come. Our ARE SUPPORTING GROUND-BREAKING OTHER SUSTAINABLY- vision is to use our size and scale to lead the COMPANIES SUCH AS RE:NEWCELL, SOURCED MATERIALS. WORN AGAIN AND TREETOTEXTILE. 100% change towards circular and renewable fash- GOAL 2030 ion, while being a fair and equal company. 100% CIRCULARRENEWABLE & To achieve this, we have developed an ambi- We’ve reduced emissions tious strategy, with a broad range of external from our own operations 35% and internal experts. Our strategy follows a by a further 21%. science-based approach wherever possible. This takes us another 26% step closer to achieving 20% OUR VISION AND STRATEGY ARE BUILT a climate positive value 13% ON THREE KEY AMBITIONS chain by 2040.