Climate reporting

We follow the GHG Protocol Corporate Accounting and Reporting Standard using an operational control approach. Most of the GHG emissions connected to our business operations and our value chain are carbon dioxide (CO₂) from the combustion of fossil fuels to generate heat, electricity, or transport goods. However, we also include methane (CH₄), nitrous oxide (N₂O) and some man-made gases such as hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF₆). The total warming effects of these gases are measured in carbon dioxide equivalent (CO₂e). Effects of the non-CO₂-gases are recalculated to the same warming effects as CO₂ – about 28 times for methane, and 265 times for nitrous oxide (GWP100, IPCC AR5).

Under the GHG Protocol, emissions are divided into three scopes, outlined below. Emissions of biogenic CO_2, carbon dioxide that is part of the natural carbon-cycle such as crop-residues, are not accounted for under any scope.

At H&M Group, we do not use carbon offsets or compensation to reduce our emissions.

To ensure robustness and credibility of our methods and data, auditors perform a limited assurance of our scope 1 and 2 emissions, as well as some scope 3 emissions – transportation, materials, fabric production and garment manufacturing. We aim to include additional emission sources from scope 3 in this assurance in the future.

Scope 1 emissions are direct emissions from our own operations. Primarily from on-site fuel-use, company cars and other vehicles, as well as refrigerants leaking from cooling systems.

We calculate emissions related to our stores and warehouses by multiplying the amount of fuel used by emission factors for each fuel-type.

We are developing our data collection and calculation for emissions generated by company vehicles and refrigerant leakage. We expect to include these in our Scope 1 reporting for 2023.

Scope 2 emissions are indirect emissions from purchased electricity, heat or steam, connected to our own operations. Primarily they come from electricity use and district heating in stores, warehouses and offices. 

We use the market-based approach in our accounting, which means that we calculate emissions based on the tracking of environmental attributes of the energy purchased, such as electricity certificates for renewable electricity. In our Sustainability Disclosure, we also report emissions using the location-based method where only the country, or grids, total production mix is taken into account. Read more about these accounting methods in the GHG Protocol Corporate Accounting and Reporting Standard. 

To calculate market-based scope 2 emissions, we multiply the amount of purchased energy of each type used in our stores, offices and warehouses by relevant emission factors for each energy-type. In 2022, we purchased renewable electricity for 92% of our own operations using a variety of certification schemes. We have signed power purchase agreements (PPAs) for several solar parks, located in the UK and Spain, and in 2022 we signed Sweden’s largest solar PPA to provide us with renewable electricity.

Scope 3 emissions are all other indirect emissions from our entire value-chain beyond our own operations. For example, cultivation of raw materials such as cotton, production, fabric dyeing, transports to warehouses and stores, customer washing and drying, and end of life. 

Garment goods

• Raw materials
  This includes emissions from production and processing of fibres such as cotton, viscose, and polyester. All materials are included. We calculate emissions by multiplying the weight of each material by the relevant emission factor in the HIGG MSI database.
• Fabric production
  This includes emissions from the fabric production processes, such as spinning, weaving and knitting, as well as dyeing and other treatment processes. All fabrics used in our garments are included. We calculate emissions using the weight of each material and the processes used multiplied by the relevant emission factors in the HIGG MSI database.
• Garment manufacturing
  This is the stage when the fabric is converted into a finished product through cutting, stitching, processing and finishing. Emissions from garment manufacturing are calculated based on primary data from suppliers combined with our internal order data. Suppliers report their energy consumption and production volumes to us on a quarterly basis. Emissions are calculated by multiplying ordered pieces with average emission per piece per production unit. Where it is not possible to match order data with supplier data, a fallback method is used based on average emissions for production country and type of garment production group.

Non-garment goods

This includes all emissions from raw material sourcing through to product manufacturing from non-garment commercial products within our assortment. For example, H&M HOME hard goods, cosmetics, accessories, footwear and toys. It is calculated in the same way as garments, but we use average emission factors throughout the product life cycle.

Transports

Upstream transport between suppliers, e.g. yarn spinner to fabric producer, are included in emission factors for materials, and therefore not in the transport-category. Transports covers all emissions connected to transportation of products to our warehouses, internal line haul within our warehouse network and delivery to customer and store. 

• For transports to our warehouses
  Emissions related to transportation are calculated by identifying how far goods have travelled per mode of transport (sea, rail, road, air) multiplied by relevant emission factors for each mode of transport. The calculation methodology uses a stepwise approach, combining multiple internal data sources. For road transports from port to warehouse, the method described below is used.
• For road transports from our warehouses to stores, internal line-haul between warehouses, from port to warehouse and for customer deliveries
  Road-transports are calculated by collecting fuel consumption data from carriers multiplied by relevant emissions factor per fuel type. A few of our carriers report emissions based on their own calculations, using same methodology as H&M Group. Transportation by air, ocean and rail is calculated based on weight and distance of goods transported, multiplied by relevant emission factor for each mode of transport.

Use of sold products

These emissions come from the customer use phase, including energy used for washing, drying and ironing the bought products. To calculate this, we take the total amount of products sold in each product category and geographical area during the reporting period and apply use-phase factors to calculate total energy consumption. Then we apply a local geographical energy emission factor to sum up the total emissions from the energy consumption.

End of life – sold products

This category covers the emissions when customers stop using our products. We estimate the share of the total produced weight that is re-worn, reused, recycled, incinerated, or disposed of in landfills. These estimations are based on our garment collecting partner’s data and industry end of life estimation models.

Other expenditures, and other emissions

In addition to the categories described above, there are emissions related to a number of other activities. For example, items that are used in our operations like garment and transport hangers, visual merchandising used in our stores, IT equipment, product and transport packaging, business travel, investments, our franchise partnerships and employee commuting.

To calculate emissions across these categories we have used different approaches depending on data availability. For some activities we used a spend-based method and multiplied the spend on each activity with a relevant emission factor. For the rest we have used an average data method and multiplied amounts of activity data (such as km driven) by average emission factors for those activities. 

The following scope 3-categories are not included in our GHG inventory, as there are no significant emission sources within these, or they do not apply to our business (numbers reflect the GHG-Protocol scope 3 categories):

2. Capital goods
8. Upstream leased assets
10. Processing of sold products
13. Downstream leased assets

This is continuously evaluated as the business changes.

Improving the accuracy of our emissions data is ongoing. During 2022, these improvements led to some alterations in our reported emissions for previous years. Most notably, in scope 3 reductions. In our 2021 sustainability disclosure this was reported as -7% compared to 2019. After updates to the method, it was reported as -3% compared to 2019 in our 2022 sustainability disclosure. 

Improving our data and calculation methods is crucial for us to track the actions we take to reduce our emissions. For example, using our current calculation model the investments we are making to decarbonise our fabric production suppliers are not represented. We expect to change this during 2023, which will be reported in our Sustainability Disclosure in 2024.

Whenever we make a change to our methods or data-sources, we update our base-year data to reflect it. We never claim these changes as emission reductions and they will not affect our 2030 and 2040 targets.