Due diligence

To be a successful business we must act responsibly. Due diligence gives us a framework that identifies and mitigates risks to ensure we operate fairly and equally.

What does due diligence mean for H&M Group?

Due diligence is an ongoing process that enables us to identify and address risks in our business, our supply chain and the communities where we operate. For many years, it has supported our decision making and has been integral to operating a responsible business.

To be effective, due diligence requires collaboration and engagement in a transparent and honest way at company, industry and government levels. And in the long run, good due diligence has the potential to bring about change for the most vulnerable people and communities. 

With several countries like Norway and Germany, as well as the European Union, making transparency a legal requirement, due diligence will only become more important in the future.

However, due diligence alone cannot mitigate or resolve risks. Stakeholder engagement, collaboration and public affairs all have a role to play in tackling more complex or structural issues.

Our due diligence process

We continuously carry out due diligence across our value chain following the process set out by the OECD:

  1. Embed responsible business conduct into policies and management systems.
    We regularly update our standards and policies to ensure they remain valid and relevant.
  2. Identify and assess adverse impacts in operations, supply chains and business relationships.
    Our own employees, our business partners, plus employees working for suppliers in our value chain, can raise a grievance. Those received from production countries are often solved with our collaborating partners, such as unions. Tools such as our Global Framework Agreement with IndustriAll and IF Metall help to ensure peaceful resolution of grievances.
  3. Cease, prevent or mitigate adverse impacts.
    We use global and local procedures to continuously identify risks. Our teams located in production countries ensure we are up to date with local context and any changes.
  4. Track implementation and results
    We continuously track several programs. For example, our work with wages. Read more about our work in this area here.
  5. Communicate how impacts are addressed:
    We have reported on our sustainability work since 2002 and publish all the reports on our website.
  6. Provide for, or cooperate, in remediation where appropriate.
    Our stakeholder partnerships and dialogues help us identify potentially adverse impacts to ensure we work in a preventative way. Our collaborative approach is key to ensure lasting positive change.

Throughout this process, we work closely with stakeholders to ensure our continuous analysis is inclusive and remains up to date.

Find out more about our approach to due diligence in this report we prepared for Ethical Trade Norway. Please note the introduction is in Norwegian. English text begins on page four.

A due diligence example – onboarding a new supplier

Our production supply chain includes hundreds of businesses around the world. When we take on a new supplier, due diligence helps us assess if they meet our environmental and social sustainability requirements.

All business partners must sign up to our Sustainability Commitment and our Code of Ethics.  When evaluating a new supplier, we share these minimum requirements early in the process to create a common understanding and ambition from the start. These requirements span issues such as working conditions, environmental practices and corruption. In terms of wage payments, we also review public information to check if any disputes have been registered. In some cases, we will reassess a supplier if they carry out actions to raise standards and meet our requirements within a given period of time.

Due diligence doesn’t stop once we have onboarded a supplier. We conduct regular reviews to assess continued compliance and performance. If a supplier violates our minimum requirements, we have the right to pause business until the issue has been remedied. In some cases, we may need to cease the business relationship. If we take this decision, we abide by ACT’s Responsible Exit Policy.