Circular & Climate Positive

H&M Group defines resources scarcity and depletion as well as global warming as two biggest environmental challenges in today’s world. Thus, a lot of attention is put on specific approaches and future goals aimed to reduce negative impact from its business operations to the greatest extent possible, and ideally develop solutions to generate an overall positive impact on the environment. Circular & Climate Positive section in CSR Report is fully dedicated to H&M Group’s subsequent objectives and corresponding steps that are already taken and should be taken to achieve full circularity and become climate positive.

Correspondingly, H&M Group signed Fashion Pact that brings together fashion and textiles companies with a common goal to become more environmentally friendly. This pact

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addresses three main areas: preventing climate crisis, conservation of oceans and restoring biodiversity (H&M Group Sustainability Performance Report, 2019).

Climate Positive: One of the long-term goals of H&M Group is to become climate positive at the latest by 2040. Accordingly, it identifies two main directions where there is a need for improvements and more efficient ways of working. The first one is aimed to reduce carbon emissions and to remove carbon dioxide from the atmosphere. In this way, four priorities have been settled to move towards a low-carbon economy (H&M Group Sustainability Performance Report, 2019).

1. Energy efficiency: to enhance energy efficiency by decreasing energy consumption within key contributors that involve stores, suppliers, transport and distribution centers

2. Renewable energy: one of the goals that should be achieved by 2030 is to source 100% renewable electricity. Thus, a company is on its way to source renewable energy within its operations, transport and suppliers. And, it is as well committed with RE100, a global initiative among businesses to use renewable energy

3. Circularity: to move towards a circular model of doing business by maximizing the life of products and minimizing the waste. To repair, reuse, recycle and encourage others to do the same

4. Technological & natural carbon sinks are used to reduce the concentration of carbon in the atmosphere. H&M Group is now focusing on preserving and utilizing current natural carbon sinks, and investigating new technological ones (H&M Group Sustainability Performance Report, 2019).

The second direction is connected with water crisis. Apparel industry is itself a huge consumer of water as textile production utilizes approximately 93 billion cubic metres of water per year (A New Textiles Economy: Redesigning Fashion’s Future, 2017). H&M Group is not an exception in this regard, but it is pursuing its efforts to make water consumption more efficient and to minimize its water-related impact on the environment. It includes implementation of activities such as reducing its water consumption, reusing and recycling water whenever possible, improving the quality of water. For instance, H&M Group is supporting its suppliers in developing countries concerning water purification by sourcing them with necessary equipment and technology for removing pollution from water.

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As well, H&M Group is a member and strong supporter of 2030 Water Resources Group, a collaboration of a variety of organizations aimed to strengthen water security hosted by World Bank Group. Also, it is working together with World Wildlife Fund (WWF) to improve water management by increasing the awareness of water challenges in fashion industry among people involved in its value chain, measuring water-related impact from its operations, reducing water consumption and water pollution, engaging stakeholders as well as policy makers to address problems collaboratively (H&M Group Sustainability Performance Report, 2019). In addition, one of the goals that should be achieved by 2020 is related to water, and consists in establishing water-efficient equipment in all operation facilities of H&M Group. However, Sustainability Performance Report (2019) indicates installment only across 67% of its stores.

Overview of 2019 progress related to Climate Positive:

 10.1% decrease in electricity use per square metre at stores (2016 baseline)

 15% decrease in transport emissions (in comparison with 2018)

 254 new suppliers involved in energy efficiency programmes

 96% of electricity purchased was renewable

 Application of electric, hybrid, natural gas vehicles for last-mile deliveries in some European countries

 Working with Geres, a French nongovernmental organization, to preserve natural carbon sinks in the forests of Cambodia

 7% reduction in water usage by H&M Group’s suppliers (2017 baseline)

 In partnership with H&M, WWF launched Cleaner Production Guide For The Textile Sector, a project that provides information about practices for more sustainable and cleaner manufacturing in textile sector (H&M Group Sustainability Performance Report, 2019).

Circularity: moving towards a circular model of doing business is a crucial step to become climate positive. Key objectives of circularity is maximizing life of products and minimizing waste. Initially, H&M Group is taking various measures to prolong life of its products. These actions involve providing customers with information on how to care for its products properly, repair and remake services and even customization options to stimulate customers to keep using them as long as possible. Thereafter, H&M Group is taking care of

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no longer necessary products being reused and recycled to prevent them from ending up in waste and landfills. It includes already discussed H&M Group’s initiatives aimed to encourage its customers to participate in garment collecting activities. Secondly, it is exploring new ways how to deal with waste in all its forms as operational and production waste, faulty products, overstock. So far, H&M Group is implementing waste management, striving to reduce amount of generated waste as well as reusing and recycling at every opportunity. It is making its efforts to forecast possible demand for products by using artificial intelligence in order to avoid overproduction. As well, if there are still some product left unsold in the stores, H&M Group would lower the price for them or, at the very least, implement reusing and recycling methods. So, its principle consists in using any means to prevent products being destroyed or landfilled.

H&M Group is exploring all options how to embed circular approach to each component of the business starting from the products themselves and ending in packaging, and even stores. The first point where H&M Group is implementing circularity is design as it is a foundation of everything including products, packaging and buildings. Design is an issue of great importance as it defines future direction of the product. “Every design decision affects how a product can be used, reused and recycled” (H&M Group Sustainability Performance Report, 2019, p.38). Main principles of circularity are maximizing product’s life and minimizing waste. Accordingly, H&M Group is making efforts to implement relevant actions to both directions in terms of design. For instance, it is adopting various practices and systems such as artificial intelligence, data analysis, 3D visualization and virtual showrooms to decrease the amount of materials, time and energy invested in the design process, and thereby minimizing waste. Furthermore, it is monitoring and gradually improving the quality of its products to ensure their durability and to prolong their life.

The next step consists in ensuring sustainability of its materials as they are essential for apparel industry and textile production. One of the goals for 2030 is to use only 100%

recycled or other sustainably-sourced materials. However, exploring new sustainable solutions for materials is not an easy task and can take a long time. As it was already mentioned, Circular Innovation Lab is one of possible methods to test and adopt new materials and processes within H&M Group. Besides, collaborative approach is increasingly urgent to accelerate the process of introducing and scaling recycled and sustainably sourced materials. Thereby, H&M Group is working together with industry experts, investing in and collaborating with other companies, creating partnerships and participating in promising projects to come up with and facilitate innovative ideas to sustainable materials. There are

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two solutions for sustainable materials – recycled materials and sustainably sourced materials. Recycling decrease the necessity for production new materials as well as using new raw resources, and thus preserving them. Also, it helps to save the consumption of energy needed for production of new materials, and to reduce the amount of greenhouse gas emissions released in the atmosphere. It as well decreases pollution resulted from harvesting and processing virgin raw materials. H&M Group is now recycling materials such as cotton, polyester, wool, nylon, plastic, down, feathers, cashmere and silver. And, it is on its way to develop new technological and innovative solutions for recycling remaining fibres. Whereas sustainably sourced materials are considered as those that are extracted taking into account environmental and social impacts. H&M group is cooperating only with suppliers of natural raw materials who comply with certain standards and regulations concerning ecological norms, human rights and labor policy. Therefore, sustainably sourced materials tend to have less harmful effects and leave a lighter footprint. As for H&M Group in this regard, it has decided to completely turn away from sourcing conventional cotton, and reach 100%

sustainable cotton at the latest by 2020. As well, it is taking care of responsible sourcing of wood-based materials and man-made cellulosic fibres (MMCF) to avoid damaging natural forests from which they were derived from. H&M Group also started to gradually depart from sourcing conventional cashmere, and it is planning to adhere to Good Cashmere Standard, which proposes various criteria for sustainable cashmere. Leather is as well a part of H&M Group’s sustainable development, which includes participating in collaborations to achieve a more responsible and sustainable leather supply chain and seeking for possible substitutes to decrease leather consumption.

As it was already mentioned, apparel industry is as well responsible for water pollution as microplastics are released through the process of washing synthetic textiles. It could be done during both production stage and customer use. Therefore, H&M Group is making its efforts to prevent or mitigate microfibers being released into the environment from both sources. Initially, it is developing new production processes, minimizing usage of synthetic fabrics and seeking for alternative materials to decrease the amount of generated microplastics during the production stage. Furthermore, H&M Group launched specific laundry bags that are created to as well minimize microplastics release by filtering function, and made them available for customers’ use. And, it is also participating in and supporting the development of special washing machine filter systems that catch microfibers.

Circular approach should be as well applied for chemical management as one of H&M Group’s goals is to become toxic-free meaning to eliminate any hazardous chemicals

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emissions into the environment. And, the initial step is to prevent the release of dangerous chemicals from its textile and leather supply chain by 2020. Chemicals ae unavoidable in apparel industry as it involves processes such as coloring, printing and washing. However, the ambition of H&M Group is to ensure that its products are safe and do not generate negative effects. Hence, it is a member of Zero Discharge Of Hazardous Chemicals (ZDHC) programme to achieve safer chemicals throughout all three stages – input, process, output.

It is also sharing its experience regarding chemicals with other fashion companies through ZDHC in order to move towards a better chemicals management across the industry as a whole.

Packaging is getting more attention in fashion industry, and the emphasis is placed on phasing out of single-use plastic packaging methods. New circular model assumes packaging to be designed and produced in a sustainable way using sustainable materials with the purpose for its further usage and reusage, and, finally, recycling. H&M Group is as well sticking to circular approach in terms of packaging, and is acting together with Ellen McArthur Foundation following circular packaging strategy. This strategy implies moving towards stated above circular packaging principles and overall reduction of packaging itself.

As for the latter, for instance, H&M Group have introduced additional charge for packaging to discourage customers from buying new bags every time they shop. The main goal concerning this point is to decrease packaging across its value chain by 25% by 2025 in comparison with 2018 baseline. Also, it is now offering only certified paper bags as it finally shifted away from plastic packaging with a view to achieving packaging to be produced from 100% recycled or other sustainable sourced materials at the latest by 2030.

Last but not least is applying circular approach to non-commercial goods within H&M Group to move towards a circular built environment. It involves paying attention to construction processes of buildings and offices, materials and design implemented throughout these processes. It as well concerns all items related to the interior within the organization and other visual and marketing products. A considerable progress has been made at H&M brand in this regard as all non-commercial goods there are following circular principles. Furthermore, H&M Group is working on introducing the same practices to other its brands. Collaborative approach is as well very important there, and H&M Group is cooperating with Ellen McArthur Foundation to achieve better results by providing various trainings and workshops aimed to accelerate the transition to circular built environment (H&M Group Sustainability Performance Report, 2019).

35 Overview of 2019 progress related to Circularity:

 Developing skills related to 3D visualization tools that are used to reduce the amount of produced samples

 Working on developing jeans on-demand to fit the needs and wants of its customers and to create unique products with the purpose to ensure their long-term using

 57% recycled or other sustainably sourced materials

 97% recycled or other sustainably sourced cotton

 Collaborating with MMCF Brand Round Table Group to develop criteria for evaluating viscose producers with relation to their responsibility to environmental and social factors. Furthermore, working only with those producers of viscose and other man-made cellulosic fibres that are compliant with certain requirements related to their current environmental practices

 Moving towards adhering to Responsible Wool Standard. In 2019, 11.6% of virgin wool within H&M Group is following this standard

 Gradually removing chromium from leather used for production. So far, 57% sourced leather is chrome-free tanned leather

 New sustainable materials were launched and implemented within H&M, ARKET,

& Other Stories

 Joining various projects aimed to explore the release of microplastics and elaborate practical solutions

 All textile and leather suppliers within H&M Group are participating in Zero Discharge of Hazardous Chemicals programme, and 80% of them have proved their compliance with the list of chemicals prepared by ZDHC organization that should be eliminated from application as they are harmful to the environment

 Developing new sustainable solutions for packaging: creating collaborations with IDEO, a global design and consulting company, to develop a sustainable e-commerce packaging system applicable for all brands as well as cooperating with RePack, a Finnish packaging service company, to implement a new system that allows customers to return packaging back to the retailer

 H&M and COS brands are applying certain circular concepts to their new renovated stores

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 H&M Group have collected approximately 29.00 tonnes of garments, of which only 3-7% have been destroyed. Other have been sent to reusage and recycling, avoiding landfill

 Sufficient recycling systems in place are applied throughout 62% of stores with H&M Group (H&M Group Sustainability Performance Report, 2019).