Purchasing practices

Most fashion brands do not make their own products – they buy them. The same is true for H&M Group. We design our products, but our production has been outsourced since 1947. This makes us customers of locally owned or multinational garment manufacturers, mainly in Asia and Europe. Our purchasing can support manufacturers in investing in their workers, creating jobs, and strengthening local economies and social systems.

These factories are independently owned and managed, ranging from small businesses with fewer than ten employees to large operations employing tens of thousands of workers, most of whom are women. We also share many of our suppliers with other global fashion and sports brands.

Our purchasing practices support stable production planning, reduce pressure on factories, and help create safer, healthier workplaces.

How brands buy their products — their purchasing practices — can support stable production planning, reduce pressure on factories, and help create safer, healthier workplaces. This can enable an environment where decent working conditions and human rights are respected and maintained. Effective planning and purchasing practices also reduce the risk of excessive overtime, delayed wage payments, and health and safety violations.

We aim to have a positive impact on our business partners and their workers. Our strong local presence in our main sourcing markets means we can build genuine partnerships and collaborate closely with our suppliers.

Most of our purchasing practices are governed by digital systems and company policies. This aims to ensure consistent standards and limit the risk of human error or external influence. It also means that many of the commitments we make, such as adhering to certain payment terms, are applied automatically.

Building relationships

Since 2011, we have used a supplier relationship management system to evaluate and develop our suppliers across several business, environmental and social impact parameters. We reward high-performing suppliers by providing production plans well in advance, enabling factories to prepare effectively and manage fluctuations in demand. For our strategic suppliers, we plan our order capacity as far as three to five years ahead, which gives them the stability to invest in their facilities and workforce.

Wages as an itemised cost

What we pay suppliers for a garment is split into different cost blocks such as material, labour and operations. The labour costs are calculated together with our suppliers using an agreed method that includes production time, efficiency and wages of workers, among other things. When wages increase, for example through increased minimum wage levels or collective bargaining agreements, the labour cost is recalculated and adjusted. This process aims to increase transparency and ensures labour costs are not part of price negotiations. Ring-fencing labour costs in this way ensures wage improvements are reflected in the prices we pay our suppliers.

Payment terms

Payment terms can impact suppliers’ financial resilience and ability to invest. We have agreed on standardised payment terms with our suppliers, which are in line with industry averages. In addition, H&M Group has negotiated a factoring agreement on behalf of all its suppliers that gives them faster access to invoice payments. Suppliers can opt to receive payment approximately three days after sending an invoice. Taking this into account, our suppliers get paid, on average, 32 days after the invoice issue date.

Exiting a supplier relationship

Sometimes we need to end a business relationship with a supplier. For example, a supplier may be phased out if our capacity or capability needs change, if the supplier fails to meet the requirements outlined in our Sustainability Commitment, or due to poor quality performance. Whatever the reason, we want to minimise the negative impact of exiting business relationships.

In our phase-out procedure, we conduct a worker impact assessment and create an exit plan in close dialogue with the supplier. We inform all relevant stakeholders, in particular trade unions, if present, or worker representatives. To limit negative impact, the phase-out process is set according to how dependent the factory is on our business, with longer phase-outs for those that need it. We monitor and communicate each step verbally and in writing. Our procedure adheres to the ACT Responsible Exit Policy.

Developing our purchasing practices

We are a member of ACT – Action, Collaboration and Transformation, alongside 19 other brands and the global union IndustriALL. As a member, we have signed five commitments for responsible purchasing:

• Purchasing prices include wages as itemised costs
• Fair terms of payments
• Better planning and forecasting
• Undertake training on purchasing and buying practices
• Practice exit strategies

These commitments help us to continually improve our purchasing practices, and make sure our purchasing practices do not contribute to negative impacts on workers.

We take part in ACT’s biannual, industry-wide assessment under the ACT Accountability and Monitoring Framework. As part of the assessment, ACT distributes surveys directly to suppliers across participating brands’ supply chains, which helps evaluate how we apply purchasing practices.

In 2025, more than 1,600 responses from our suppliers were collected. For the third assessment cycle in a row, our suppliers rated our performance at or above the overall survey average across all areas. We rated particularly high on, for example, terms of payment, forecasting and planning, and sourcing strategy. More work remains to be done on order placement and changes, and product development. These insights guide our priorities and ensure we continue building fair, transparent, and collaborative relationships with our suppliers.

As we are committed to continuously developing our purchasing practices in all areas, we also work to strengthen internal capacity. Since 2022, we have trained more than 660 H&M Group employees in purchasing practices, covering over 80 percent of key roles in 2025.