How responsible is H & M’s supply chain?

OECD Observer Business Brief
OECD Observer

©Ira CHAPLAIN/SINOPIX-REA

When an 8-storey building in Rana Plaza in Bangladesh crumbled in 2013, over a thousand garment workers died. For those of us who buy fast fashion, it confirmed something we suspected: that many of the people who make the clothes we wear are, at the least, badly exploited, if not treated as slave labour. They work in fire traps. They receive death threats when they try to organise a trade union. They work long hours without a break so that factories can make their deadline. 

Hennes & Mauritz, better known as H & M, was not one of the brands at Rana Plaza. But the public outcry following this and other factory tragedies gave this well-known high street store fresh impetus to focus on their supply chains. And they are not the only global brand to do so.

For a company that wants to clean up its act, the first thing to do is to find out exactly what they should be upholding. The OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights lay out labour standards that include the right to collective bargaining and a fair living wage.

The OECD’s Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, on the other hand, advises companies on how they can best fulfil their responsibilities. Publically disclosing where their factories are is a start: it makes it easier to monitor them.

So, how is H & M doing on labour and human rights today? We asked them.

OECD Observer: How does H & M reconcile greater flexibility and speed in production with the human rights risks this engenders? Often, this requires outsourcing work to indirect suppliers over which you have less control. And that heightens the risk of inadequate employment conditions, such as unpaid overtime.

H & M: We work with around 800 suppliers globally. Our commercial relationships with these suppliers are direct and we haven’t been using any agencies or middlemen for many years. A large percentage of these suppliers have been partners with us for over 5, 10 or even 20 years. Also, having dedicated teams working in our production offices gives us the unique position of having daily contact with our suppliers. We constantly visit them and we closely follow how the production takes place, supporting them in making improvements through capacity-building programmes and activities.

How does H & M reconcile competitive pricing with a fair living wage?

It is important to understand that there is no correlation between garment workers’ wages and the price tag on clothes. This is a common misconception. Wages in production countries are industry issues. The factories producing for us also produce for other retailers and brands at the same time, and workers earn the same wage no matter the price tag of the garment on which they are working.

For the H&M group, we reconcile competitive pricing with good working conditions and wages through: the benefits of scale and size, long-term relationships with our suppliers, the fact that we use no middlemen and have direct contact with our suppliers, long-term forecasting, efficient logistics and generally trying to be cost-conscious in the way we operate. Our business idea is about democratising design and making sustainable fashion affordable for everyone.

Having said that, wages are a priority in our sustainability agenda. Our vision is that all textile workers should earn a fair living wage. That is the starting point of our fair living wage strategy, which acts at different levels, from our role as buyers to the government’s responsibility in this area. As buyers, we ensure that we maintain good purchasing practices and price structure by being long-term, stable business partners, which helps factory owners pay a fair living wage.

Does H & M provide easily accessible information on the whereabouts of its supplier factories?

All our suppliers are publicly listed at hm.com/supplierlist

Have there been democratic elections of worker representatives in factories other than Bangladesh?

In 2017, 458 factories (52% of our product volume) implemented democratically elected worker representation. Besides Bangladesh, the other countries that have also implemented this at factories are China, Cambodia, India, Turkey, Indonesia, Myanmar and Ethiopia.

Other than in Bangladesh, have there been audits of compliance with safety and security standards of factories of direct and indirect suppliers?

Health and safety are part of our high standards and strict requirements that all our suppliers must comply with through our Sustainability Commitment. We monitor the compliance of all our suppliers in different sourcing markets through our Sustainability Impact Partnership Programme (SIPP).

What is the most critical change H & M has made following its many chemical tests of last year?

H&M group has always been at the forefront of work on protecting against hazardous chemicals. We have one of the strictest chemical restrictions in the industry and they have been continuously updated since 1995. Last year, we strengthened our strategy in this area with the vision to lead the change towards safe products and a toxic-free fashion future. Our long-term goal and ambition is to achieve full traceability of input chemicals by 2030.

Your report states that it does not include franchised operations. Could you please clarify?

Franchising is not part of our expansion strategy generally. Our stores are run only by us with the exception of markets in which we couldn’t open wholly owned subsidiaries. What the sustainability report says is that unless stated, franchise operations are not included as they are not considered to be our own operations. But, even if they are not included in the report, due diligence is conducted before entering into any business relationships. This includes the assessment of sustainability risks. In addition to that, all our partners, including our franchise partners, must sign and comply with our Sustainability Commitment and Code of Ethics.

If even only one child labour incident at one of your suppliers was revealed in 2017, can H & M unequivocally say that it does not use any child labour in any part of its supply chain?

Child labour is totally unacceptable and is one of the most serious violations of our standards and requirements. We have been working in this area for many years, and child labour is almost non-existent in the export garment industry. We recognise that child labour still exists in the world today, but it is primarily in the agricultural sector, further upstream in various supply chains and in situations of poverty and vulnerability. We apply due diligence and pro-actively work to reduce the risk of child labour in our supply chain. If we identify cases of child labour, we have a child labour remediation policy that ensures that the best interest of the child is taken into consideration.

References and further reading

OECD (2018), OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, OECD Publishing, Paris, https://doi.org/10.1787/9789264290587-en.

OECD (2018), OECD Due Diligence Guidance for Responsible Business Conduct, OECD Publishing, Parishttp://mneguidelines.oecd.org/OECD-Due-Diligence-Guidance-for-Responsible-Business-Conduct.pdf

OECD (2011), OECD Guidelines for Multinational Enterprises, 2011 Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264115415-en.

Nieuwenkamp, Roel, “Corporate leaders: Your supply chain is your responsibility”, OECD Observer, No 299, Q2 2014. https://oe.cd/2iX

Buhmann, Karin (2017), Responsible business conduct and competition: The OECD Guidelines for Multinational Enterprises and responsible supply chain management, OECD Yearbook 2017https://oe.cd/2jj

OECD (2014), Annual Report on the OECD Guidelines for Multinational Enterprises 2014: Responsible Business Conduct by Sector, OECD Publishing, Paris, https://doi.org/10.1787/mne-2014-en.

TUAC: Trade union cases on OECD Guidelines for Multinational Enterprises http://www.tuacoecdmneguidelines.org/Home.asp 

OECD work on responsible business conduct: http://mneguidelines.oecd.org/guidelines/

Disclaimer: This interview does not necessarily represent the views of the OECD or its member countries.

©OECD Observer Q3 2018




Economic data

GDP growth: +0.6% Q2 2018 year-on-year
Consumer price inflation: 2.9% July 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.3% July 2018
Last update: 11 Sep 2018

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly


Online edition
Previous editions

Don't miss

  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Watch the webcast of the final press conference of the OECD annual ministerial meeting 2018.
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • Ambassador Aleksander Surdej, Permanent Representative of Poland to the OECD, was a guest on France 24’s English-language show “The Debate”, where he discussed French President Emmanuel Macron’s speech at the World Economic Forum in Davos.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Rousseau
  • Do you trust your government? The OECD’s How's life 2017 report finds that only 38% of people in OECD countries trust their government. How can we improve our old "Social contract?" Read more.
  • Papers show “past coming back to haunt us”: OECD Secretary-General Angel Gurria tells Sky News that the so-called "Paradise Papers" show a past coming back to haunt us, but one which is now being dismantled. Please watch the video.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2018