H&M Group – A fashion buyer
The majority of the fashion brands are not fashion manufacturers, they are fashion buyers. This is fundamental to understand the role of purchasing practices. The same goes for H&M Group, we have never owned any factories, but always outsourced production as part of the original business idea created in 1947. It means that we are customers to locally owned or multi-national garment manufacturers, based mainly in Asia and Europe. By buying from these manufacturers, we support local business and economic development by transferring knowledge and through investments. The factories are not owned or managed by us, but by independent businessmen and women employing from hundreds up to tens of thousands of women and men, producing garments or other products found in our stores.
Why are responsible purchasing practices important?
Responsible purchasing practices are fundamental in safeguarding the fair treatment of garment workers and to provide a healthy work environment. It is difficult for suppliers to be good employers if the buyers are not committed to responsible purchasing practices. Some key questions to ensure that you are a responsible buyer include: When will the supplier be paid for the goods produced? What will that price be, and what parameters will you negotiate that price on? What are the cancellation grounds and how are they regulated in contracts?
As an example; the fashion industry is generally seasonally dependent. Customers will buy seasonal products when they need them. For example, swimwear is expected to be found in our stores during spring and knitted wear in the winter. This in turn creates a buying and production pattern, where there are certain periods of high peaks in production, and other periods with less production. Good purchasing practices and supplier relationships will help to address challenges related to uneven production based on customer demand. We can, for example, ensure that we, together with the supplier, plan the capacity well in advance, to reduce excessive overtime for factory workers in peak seasons, and to plan for periods with less customer demand.
Buyers have an important responsibility to create an enabling environment for human rights to be properly respected and implemented in practice, for example by enabling timely payment of products ordered so that suppliers in turn can pay wages to all workers on time. Without adequate planning and responsible purchasing practices, the risk of overtime, late wage payments, and health and safety violations, increases significantly. It also helps us to positively influence the same indicators allowing for a healthy work environment and good conditions in the factories.
What are responsible purchasing practices at H&M Group?
We have a strong local presence in our sourcing markets which makes it possible for us to have genuine partnerships with our suppliers and collaborate closely with them on a daily basis. We see this as a crucial part of being a responsible buyer. For example, we have our own production offices in Phnom Penh, Dhaka, Shanghai and Yangon. Our 21 production offices in Europe, Asia and Ethiopia employ close to 3,000 colleagues supporting about 750 suppliers on a regular basis. We are always within reach for our suppliers. This way of working has enabled the development of partnerships built on trust.
Since 2011, we work with a Supplier Relationship Management system that guides our supplier relationships. It helps us to evaluate, develop and reward responsible suppliers – in short, to be a more fair buyer. It is also through this system that H&M Group secures that suppliers receive production plans well in advance. For the best performing suppliers, we plan our order capacity for as long as 3-5 years ahead.
As part of our responsible purchasing practices, we also ring-fence the labour cost in our negotiation process with all our suppliers. This means, that the labour cost is fixed and hence cannot be negotiated on. The price will only be negotiated on other parameters, such as materials, meaning the garment workers’ wages are never negatively affected by price negotiations. As such, responsible purchasing practices support the development of fair living wages.
Still, many challenges remain to be addressed in order to make sure that our purchasing practice does not contribute to risks of human rights violations on the factory floor. To continuously develop and improve our purchasing practices, we ask our suppliers how they perceive us as a buyer through anonymous surveys. Last year, 96% of our suppliers said that we are a responsible buyer – and we are hard at work to bring that number up to 100!
Signing The ACT commitment on purchasing practices
We are a founding member of the collaboration ACT – Action, Collaboration and Transformation – together with other brands, and the global union IndustriALL. The ACT collaboration, created in 2014, has five commitments we need to adhere to, in order to be classified as a responsible buyer. We have signed up to them all.