Purchasing practices

H&M Group works with independent suppliers and manufacturers to produce our products. We design our products and build long-term relationships with suppliers, many of which are locally owned or multinational garment manufacturers, mainly in Asia and Europe. While we do not own the factories where our products are made, our purchasing practices can affect how suppliers plan and invest in their operations, including areas related to employment and working conditions.

The factories in our supply chain are independently owned and managed, ranging from small businesses with fewer than ten employees to large operations employing tens of thousands of workers. Some of these suppliers also work with other global fashion and sports brands.

How brands purchase their products can affect factory planning and workload management. Poor planning or late changes can create pressure for suppliers and may be linked to issues such as overtime, delayed payments or health and safety risks, which is why purchasing practices matter.

Our local teams in our main sourcing markets work closely with suppliers on purchasing practices and supplier relationships.

Many of our purchasing practices are supported by internal policies, procedures and systems intended to support consistent ways of working across areas such as forecasting, costing, payment terms and supplier exits. Examples of how these practices are applied are described in the sections below.

Building relationships

Since 2011, we have used supplier assessments based on The H&M Group Sustainability Standards for Business Partners to help inform how we work with suppliers. These assessments cover business, environmental and social areas and are one input into how we manage supplier relationships. We also share order forecasts with suppliers in advance to help them plan capacity. For our strategic suppliers, we plan order capacity as far as three to five years ahead, which can provide greater predictability and support longer-term planning.

Wages as an itemised cost

What we pay suppliers for a garment is split into different cost blocks such as material, labour and operations. Labour costs are treated separately from product price negotiations. We use a structured costing approach across our supplier base, where labour cost is calculated jointly with suppliers at factory level, based on production time, efficiency and wage inputs. When wage inputs change, for example through minimum wage changes or collective bargaining agreements, the labour cost can be recalculated and adjusted according to the costing process. This process is intended to increase transparency and keep labour costs separate from product price negotiations.

Payment terms

Payment terms can affect suppliers’ cash flow and investment planning. 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 The H&M Group Sustainability Standards for Business Partners, or due to poor quality performance. Whatever the reason, we use a phase-out procedure intended to identify and manage potential worker impacts.

In relevant phase-out cases, we conduct a worker impact assessment and create an exit plan in dialogue with the supplier. We inform relevant stakeholders identified in the process, in particular trade unions, if present, or worker representatives. The phase-out timeline is set with reference to the factory’s dependency on our business, with longer phase-outs where the process identifies a need. We monitor and communicate each step verbally and in writing. Our procedure adheres to the ACT Responsible Exit Policy, which sets out steps for managing factory exits and addressing potential impacts on workers.

Developing our purchasing practices

We are a member of ACT – Action, Collaboration and Transformation, an agreement between global brands and the global union IndustriALL, focused on purchasing practices and wages in the garment, textile and footwear industry. As a member, we have signed five commitments:

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

These commitments provide a framework for reviewing and developing our purchasing practices, including areas that can affect 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.

According to the 2025 ACT assessment results, supplier responses rated H&M Group at or above the overall survey average across the assessed areas. Results were stronger in areas such as 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 help guide our priorities for developing our purchasing practices.

To support continuous development of our purchasing practices, we also work to strengthen internal capacity. Since 2022, more than 660 H&M Group employees have completed purchasing-practices training. In 2025, this covered more than 80% of identified key roles in our production and buying functions.