We ask CEO of H&M about their role in sustainability in fashion On the 26th May Trewin Restorick headed to Stockholm, home of H&M and where the businesses began, to interview Karl-Johan Persson, CEO of H&M. What followed gave us an insight from one of the largest fashion companies in the world and revealed huge complexity and demonstrated that a lack of hard data is creating a fog through which it is hard to see clearly. TR: There seems to be a growing debate around sustainable fashion and what it is, what do you see H&M’s role being in this new way of working, how do you as the leader of the company see that panning out for you? KJ: Well I think the whole sustainability focus is necessary, it is being scrutinised by the media and discussed by customers. This is healthy as long as it’s done in a nuanced way and not portrayed as black and white. To address sustainability effectively companies have to integrate it into all parts of the business, you can’t just leave it to one department. Sustainability has to be part of the normal goals for every team, it has to be followed up on and become part of the whole culture. H&M aims to be at the forefront within the fashion industry on the social side and on the environmental side. We do not want to do the minimum but to be at the forefront innovating and leading positive change. TR: It’s an interesting view from a CEO, you’re taking a financial hit with some of your sustainability decisions, on your use of organic cotton for example, so what is it as the leader of the company that makes sustainability so important for you when in it might lack the short term financial return? KJ: For many listed companies it is tempting, with the short term focus from the stock market and analysts, to only maximise short term profits. Some sustainability topics require a lot of investment and are difficult because it’s a long term return. But my grandfather founded the company. We’re not in it for the short term, we are genuinely interested in how healthy H&M will be for future generations. I care a lot about the future of the company and there is a clear business case connected to sustainability because customers care and colleagues care. To keep the best colleagues and to attract new colleagues we have to be a responsible employer and do the right thing. There is a clear business case long term and that’s why we will invest in many of these things. There are some easy sustainability things you can do, reducing resource use which brings costs savings, the harder ones are things like organic cotton where this is costly and we don’t charge more for the customer. TR: That comes across on the statements on your website and in interviews. So how do you feel when you’re lumped together in the fast fashion bracket, is that fair? How would you describe your company? KJ: I honestly believe we stand up quite well because we are investing a lot. I’m not saying we are perfect - far from it, we have a lot still to do and the industry has still a lot to do. There are major challenges. There are some mainstream brands like H&M doing a lot and there are some not doing anything. There are some high end brands not doing anything and there are some – particularly niche sport brands doing a lot. You have to go deeper and really look at what are the big challenges and what companies - regardless of what bracket you put them into - are doing good work. Often people only look at the price tag and think well it’s the mainstream fashion companies that are the problem. TR: And that seems to be your biggest challenge which is that it’s a very complex and nuanced debate, but people immediately jump to the conclusion that cheap means non-sustainable and expensive is sustainable - which we know is not necessarily the case. So how as a company can you get that message out better? KJ: We have always said let’s do good things and that will come out, we don’t want to stand there and scream about all the good things that we do - not saying again that we are perfect - but we have communicated more and more because we see that it’s necessary. At the end of the day it’s not H&M who should say it, it’s guys like you who are knowledgeable, good economists like Geoffrey Sachs, or people who can look at the complexity such as environmental specialists and people fighting poverty. TR: So there needs to be a broader societal debate and can you help catalyse that or is that difficult for a company in your position? KJ: It is difficult for us. For example if a lot of people get the idea that buying from companies who buy from countries like Bangladesh, Cambodia and Vietnam is something terrible, we want to challenge this view showing we are helping taking people out of poverty and giving them opportunities to build a decent life. But it is challenging as people question our motives and approach. TR: Again looking at your website and seeing The True Cost film, one of the areas where it seems you’re investing is in countries such as Bangladesh and Cambodia, they appear to be countries which are important to you. It’s an area where campaigners question you heavily. So if I were a customer of H&M what would say to me if I was about to buy your garment, what’s the reassurance you would give me - as the leader of the company - that the people who made it are treated fairly? KJ: We are open with our supplier list and are one of the few companies who are. We have our code of conduct to which suppliers have to comply. We are constantly working on improvements. We are looking at what we can do to further improve the situation by purchasing practices and helping to plan the capacity of suppliers. We are actively working with the Governments on raising wages and developing annual revisions in partnership with the ILO and other experts. We are collaborating with other brands but there are a lot of challenges. It is a good base and we are improving all the time. I would say we are at the forefront when it comes to social development, I don’t think many companies are actually going to Cambodia, to Bangladesh, to talk about increased wages which affects the cost. TR: And you are doing that? KJ: Yes I have met with the Prime Ministers in Cambodia and Bangladesh to discuss issues such as higher wages, annual reviews and the need for collective bargaining. We believe this is the right thing to do in the long-term as it generates stable production markets. This is an indication that we are genuinely involved and we think it’s important. Discussions at a country level are crucial as we have to ensure wages in the textile industry are aligned with other salaries otherwise resentment and disruption can occur. Governments are also concerned about potentially losing work to neighbouring countries, so it’s again very complex. You can’t do everything at once it has to be a step by step approach. TR: So the Rana Plaza disaster was in one of your core countries, how did that impact the way you worked and changed your business practice when you saw that unfold? KJ: It was a terrible catastrophe. H&M was not present and has never been a buyer there. Since the disaster we and other companies have got together and focussed even more. Increased resources have been put into securing the whole country, The Accord was developed and now all buildings are inspected and improved, so that’s the good part. TR: Do you think there’s still a need for greater collaboration? KJ: Absolutely. Again the textile industry is far from perfect and there are still a lot of challenges. These need to be tackled through collaboration on initiatives such as ‘The Accord’, by greater transparency, better customer labelling and continued environmental improvements. We are seeing areas of collaboration that will help, and again not talking about fast fashion or high end, but all the companies who are in Bangladesh, and there are a lot of high end brands present in Bangladesh as well - let’s work together. TR: There are a few that might not want that debate KJ: Well yes exactly, but it’s the truth. Let’s talk about the facts and the truth. TR: But everybody wants to ring fence their reputation KJ: And it’s easy to put it on fast fashion. TR: Have you felt isolated at times as a business, you’ve been a lot more vocal about sustainability than many of your competitors, is there a risk associated with that that you’re stuck out on your own? KJ: No, certain brands maybe will think like that, but there are a lot of other brands doing great work, Nike, IKEA is a great example of long term low prices but also doing good things, and many others, so we have good collaborations with other brands as well in certain areas TR: Can I ask you about something which I sense is a passion of yours, which is the circular economy, could you talk through your hopes in terms of the technology you’re developing in that area and when we’ll see sight of the investments you’re making there? KJ: It is promising in certain areas, we can’t talk about it all for competitive reasons but I strongly believe that innovation will be the way forward. We have a certain level of consumption today in all the industries. The result of this consumption is that a lot of jobs are created, a lot of taxes are paid for schools, hospitals, roads and so on, and that’s the good side of consumption. There’s a lot of talk saying we don’t need to consume as much as we do, well I can agree, but it’s in the base of something that we have built up and we are in many ways dependent on that. TR: The question is how do you grow sustainably KJ: Exactly, it’s to continue to grow in a sustainable way, I think that’s good, and continue to consume because there’s no other way around it, but to grow and try to do well. I’ll give you one example that we want to continue to grow but we want to reduce the footprint of our carbon dioxide emissions. We want to continue to grow but we want 100% of our energy to come from renewable sources, we want to continue to grow but we will continue to innovate in new technologies in garment collecting but also in new technologies so we don’t harm the environment, and natural resources and all of that. Innovation is the key. TR: Unilever has made a bold statement about doubling growth and halving emissions, could you ever see that being an ambition for H&M, or something similar? KJ: We have in our commitment to get all of our energy from renewable sources where it is possible and there’s a huge improvement in terms of growing but decreasing in absolute numbers the carbon dioxide emissions, so that’s ambitious and we are heading in the right direction. TR: So one day we might hear a similar statement? KJ: Yes I think so. There is so much positive going on, that’s what I mean. TR: Your position on organic cotton, what drove that? KJ: There are some negative sides to conventional cotton, so we said let’s put a bold sustainability goal when it comes to cotton, that all cotton should come from more sustainable sources by 2020. That will require investments which we are doing. We are the biggest buyer of organic cotton in the world today and the goal is to increase all the time. For many years we have been a member of the Better Cotton Initiative and this along with our commitment to organic cotton will help us hit our sustainability target by 2020. TR: Kering are an interesting company, they talk about a lot of the same issues as you in terms of transparency and collaboration, they’ve just released their first environmental profit and loss accounts and they’ve said they will freely share the process, is that something you’ve considered? KJ: We have discussed it. For me there are so many things in a sustainability report or the sustainability work that it’s hard to fit everything in to a profit and loss account or a balance sheet so I think it’s actually better to do a separate but very clear sustainability report where everything is included and revised by external parties to make sure that everything in it is correct and transparent and to make that mandatory for companies. TR: Make it mandatory? KJ: I think it would be great because the best way to put pressure on us companies I think would be to make it mandatory for companies above a certain size because otherwise it might be a bit tough. And also if we could develop what we are working on now; the Higg Index where it would become really transparent for customers, where they can look at a hand tag on the garment to see exactly what the sustainability impact of the product is, on the social side and the environmental side. Then you bought with that in mind. And customers will start to know more and companies will do more and more. TR: So that dual level of policy to get everyone to the same level and customer transparency? KJ: Exactly. I think it is human nature, that you do what you are measured on. If you have to put out a sustainability report every year where employees, external experts, media, customers, everyone who’s interested can see have there been improvements in that area, are there ambitious goals, what’s happened? TR: I think you’re right. My suspicion is that there are some serious laggards in your sector, and I believe the government’s role is to get everyone to a minimum standard where everyone can then compare then it becomes much easier to see who’s doing way above and you can see who’s not. It’s incredibly hard from outside the industry, unless you have that standardisation. KJ: Yes it becomes easier to say, let's look at facts here. Forget the high end or fast fashion part, but put up the sustainability reports next to each other then we can have a look. What is H&M doing, what is that company doing? Here, you have a great opportunity, you can say to us, this other company is doing this which is fantastic why don’t you do the same? Then it becomes really interesting, challenging each other, having a good debate on challenges for the industry and particular companies. But today, people have made up their mind, and it’s black and white, we miss fact-based discussion. TR: Do I sense some exasperation about where the debate is currently? KJ: Yes a little bit. I think for us yes but also for the whole industry it is plain wrong and can be harmful for society and for many people, for the environment, when we pretend to discuss. It is important to have a fact based discussion to tackle the challenges. Actually sitting down and talking, not just making up your mind that company X is doing a good job and company Y is doing a bad job. TR What do you feel the role of the customer is in this sustainability journey? KJ: I think it’s very hard for the customers today because there are so many companies out there, to really understand all the complexities and what’s behind their sustainability work. So I would actually look at the sustainability reports and try to understand more about the company, whether it’s a luxury brand or a low cost brand like H&M– are they a responsible company? Do I like what they’re doing? Are they heading in the right direction? It will be easier with the Higg Index and when transparency becomes clearer. So that’s the only thing I can think of: I would continue to consume because there are good sides to consumption but do it from companies that take responsibility. TR: So final question, fast forward to H&M in 5 years time, what might customers see that is different to H&M now. KJ: Well I hope, really what I’ve just described. That we are still a good fashion company, having good essentials, the latest trends is something we are proud of. We can still have really affordable prices so we are still ‘for all’, get good quality, long-lasting garments, so it’s not throw away fashion, and also the most responsible company when it comes to sustainability. Doing a lot of good things, actually participated in driving change when it comes to recycling products, closing the loop, wage structures in developing countries. I genuinely think that we will be there. It’s part of what makes the job fun, actually doing the right things.