Introduction
Consumers have become more cautious about the products and brands they support and their effect on the environment. Corporate Social Responsibility (CRS) is a principle that is based on having corporations behave well and act as good corporate citizens by obeying the law and ensuring they conduct activities that do not harm the environment or exhaust natural resources (Ringstrom, 2021). Businesses can be socially responsible for fear of consumer and environmentalist pressure or as part of their strategy to ensure continuity. Firms decide what is right and wrong using business ethics as it provides moral guidelines and direction in which businesses can make sustained decisions. This case study will evaluate H&M’s corporate and social responsibility of H&M by analyzing its CRS approaches, code of ethics, vision, and strategy, the theories that it uses to make CRS decisions and evaluate its overall ethical performance.
H&M
H&M is a fashion company that produces a wide range of brands that enables people worldwide to express themselves through fashion. The company relies on a business concept of quality fashion at the best price, making its brands affordable to many people globally. H&M has over five thousand stores, including e-commerce, in 52 markets and 153,000 employees, making it the second-largest fashion retailer after Zara (H&M Group, 2022). Although the company is Sweden-based, over 80% of its revenue comes from other countries. Germany is one of the largest markets, operating over 150 H&M stores and representing 30% of the total sales (H&M Group, 2022). This shows that the company is available in diverse markets.
H&M CSR approaches
H&M’s corporate social responsibility is centrally managed by the Stockholm headquarters, where ten employees are entirely responsible for CRS activities. It has led water and sanitation campaigns in India, one of the water-stressed regions in Asia, by holding campaigns to raise awareness of and providing access to water, hygiene, and sanitation. H&M has education campaigns on the environment that teach about reuse, reduction, and recycling. It has significantly improved the learning conditions of some Asian schools by building new infrastructures and providing learning equipment (H&M Group, 2020b). H&M has engaged in empowerment and livelihood upgrades by solving social issues such as unemployment. H&M has partnered with other corporations and NGOs to offer employment opportunities to people (H&M, 2018). This move helps to upgrade the living standards of people in society.
H&M uses organically grown fiber as raw material, has reduced the use of hazardous chemicals in the production of its clothes, improved its water conservation strategies to ensure that it does not use too much water, and increased its worker’s protection rights. H&M has issued a list of guidelines and regulations that should be observed by their workers, which helps in ensuring they are not exposed to harsh working conditions or involved minors in the process. H&M has adopted strategies to encourage its consumers to recycle their unwanted garments at H&M stores and receive discounts.
H&M Code of Ethics
H&M has a code of ethics that directs it to ensure sustainability. Regarding health and safety, H&M requires building safety to be enhanced by ensuring that no hazardous equipment is used in their buildings (Wren, 2022). All buildings must have well-marked fire exits and have all employees trained on the necessary actions to take in case of a fire accident. Additionally, the premises should be regularly maintained to ensure a safe working environment for its employees.
In concern for workers’ rights, H&M does not accept any form of forced or prison labor to be used on its employees. In case migrant employees are in the company, they will be compensated the same wages as the local employees to enhance equality (H&M, 2020). Migrant workers should not be subjected to commissions or other fees that are likely to be unfair treatment. All employees in H&M are to be treated with dignity and respect, and they should not be subjected to corporal punishment or any harassment (The H&M way, 2020). Discrimination of color, gender, age, religion, sexual orientation, disease, or political opinions is not allowed on H&M premises (H&M, 2020). Additionally, all employees should have a written contract in their local language provided to them by H&M, and they should be aware of the terms and conditions.
H&M has a code of ethics regarding the environment due to the increasing consciousness o the environment. All the suppliers of H&M must ensure that they adhere to all the environmental rules of the respective countries. This is mainly concerned with producing their garments, climate change and water security. All their companies must have environmental permits to work in their respective countries to ensure they do not break any environmental rules (H&M, 2020). The chemicals used in their companies should be well stored and have clear labeling with the local language and a material safety data sheet in every workshop (Fisher, Lovell, and Velero-Silva, 2012). Besides, H&M should treat all their water before it is discharged to ensure it meets the local legislation, and any hazardous waste from the company should be well discharged. The company has pledged transparency and integrity to uphold its code of ethics.
H&M Vision and Strategy
H&M’s vision aims to lead a climate-positive and circular environment while upholding fairness despite global challenges. H&M relies on the three sustainability ambitions, whereby being fair and equal ensures that sustainable resources are equally available to everyone (H&M Group, 2020). H&M wants to respond to health crises by solving the problem of inequalities in society, and finally, to make progress, the company has to be honest, willing to take the lead and have the guts to take risks (H&M Group, 2020). Every company’s decision must integrate social and environmental impacts to enhance sustainability.
Climate Change
Climate change is the unusual weather patterns and temperatures in a given region. This could include low rainy seasons, flood seasons, high temperatures, prolonged dry seasons, and changes in when slow falls. According to a study by NASA, world temperatures have been rising, and the earth is becoming warmer due to climate change (ReliefWeb, 2022). These unusual weather conditions constitute climate change because the increased temperatures cause snow to melt, hence raising the sea level.
COVID-19 has negatively affected climate change by holding many climate change projects. Many countries, for instance, Brazil, relaxed their legislation regarding forest protections and declassified some of the toxic pesticides for use during the second wave of COVID-19 (PWC, 2022). On the other hand, the USA removed some restrictions on fossil fuels. The heavy use of plastics for private transportation has many private companies have increased waste pollution (Loureiro and Alló, 2021, p. 453). The use of masks has increased pollution by dumping them in unnecessary places. Besides, many companies have sliced their climate change budgets and channeled the funds to revive the effects of climate change (Loureiro and Alló, 2021, p. 455). Other socioeconomic factors such as income and school used to help mitigate the impact of climate change were affected by the pandemic. COVID-19 has halted many discussions and conferences made to discuss climate change, which shows that Covid-19 has had negative effects on short and long-term climate change.
Climate change has affected the production of its raw materials due to the changing weather patterns. The rise in temperatures, unpredictable rains, and limited fresh water in regions that grow cotton are likely to affect the production patterns that affect their supply to H&M and other companies in the industry (Peters, Li, and Lenzen, 2021, p. 9). This fluctuation in the production of raw materials causes price vitality whereby the prices of clothes are changing too fast. This challenge has been solved by companies such as H&M, relying on artificial fiber and reprocessing of old fabric to create raw materials for new clothes (Ro, 2018). Besides the increasing climate change effects, especially the rising temperatures lower the quality of fibre that s harvested. This generally lowers the overall value of clothes, which is bad for the market (BlackRock, 2022). This shows that climate change significantly affects the raw materials and production processes in the clothing industry.
Ethical Egoism Theory
According to ethical egoism theory, everyone is supposed to carry out their own self-interest without being obligated to promote any other person’s interest. Organizations should only focus on what benefits them without considering the interests of the government or society (Melé, 2012). The theory assumes that when people carry out their own interests, they will unintentionally benefit society too without their knowledge. H&M is a fast-fashion company that focuses on producing products at cheap costs. Therefore, the company mostly focuses on its interests by adopting low-cost productions in countries like Bangladesh, which leaves high carbon prints, insecure employment, and high water consumption (Peters, Li and Lenzen, 2021). Most of the H&M factories in Bangladesh are run on coal. This shows that the company is more interested in its own interests and not the interests of its workers in other countries. H&M follows the ethical egoism theory in conducting its business operations.
Utilitarianism
Utilitarianism theory is an ethical theory in which companies try to maximize their profits while minimizing the negative impacts on their stakeholders. In this case, utilitarianism advocates caring for everyone’s welfare and the stakeholder’s welfare (Crane, Matten, Glozer, and Spence, 2019). Therefore, different organizations have to take different steps and have varying ambitions regarding climate change. Thus, according to utilitarianism, what matters more is the outcome, not the amount invested in the ethical process (Reuters University, 2021). Most of the decisions are made without considering the costs involved. H&M has demonstrated utilitarianism by maximizing its costs while minimizing harm to its consumers. The company has engaged in various recycling activities whereby it recycles clothes and reuses the material so that it can reduce its harm to the environment. This method maximizes profits by reusing the material; therefore, the company does not have to buy other raw materials (Savulescu, Persson, and Wilkinson, 2020). This will reduce harm to stakeholders by ensuring that clothes unused or old clothes are recycled. H&M has shown its commitment by making ethical decisions without considering the costs. Recently, the company set aside $100 million for the creation of a recycling machine, a project that other clothing companies have been shying from due to its high costs (Björne, 2021). H&M has engaged various stakeholders, including universities in Japan and UK, to create the recycling machine.
Ethics of Duties
According to duty-based ethics, an action is right or wrong based on whether the people have done the right thing and avoided the wrong thing, but it is not based on the consequences. In this case, the people use the rule of law to determine right or wrong, whereby an action is considered right if it abides by the law and wrong if the law prohibits it (Crane et al., 2019). Duty-based ethics do not depend on the outcomes as long as what the company does is within the law. H&M seems to have followed the ethics of duties theory in its sustainable strategy implementation because it only does what the law requires. The company has rolled out a sustainable strategy that is not yet significant based on the pollution impact it creates for society (Maranges et al., 2021b). H&M has varying sustainable strategies depending on the country that they are in. For instance, countries like the US and the UK have introduced new packaging that replaced the old plastic bag packaging to save the environment.
Human rights
Human rights highlight the general laws that every human is entitled to despite their race, religion, disability, or other disparities. They include universality, equality, independence, participation, and the rule of law (Crane et al., 2019). Although H&M has adopted some of these principles, the principle of equality is still an issue in the company. H&M, on several occasions, has been accused of wage theft for its employees. Although the company did not break any laws, it was accused of not compensating its employees for their wages during the COVID-19 pandemic, especially in Bangladesh, Cambodia, and Indonesia. According to a research study conducted by the Clean Clothes Campaign, 40% of the employees were paid less during the pandemic than before (Johnson, 2021). The employees have not been compensated overtime payments, and there were massive layoffs in the company without a good procedure which shows that the company did not adhere to human rights ethics.
Overall evaluation of H&M’s Ethical Performance
Based on the pollution created by the fashion industry from the production process and logistics, and even after the clothes have been dumped, H&M has not done enough ethical activities which can outdo its harm to the environment. The company has only done the bare minimum to lure consumers into thinking that they are ethical, also called greenwashing. One of the main disadvantages of egoism theory is that it creates an environment in which no one wants to live (Human Relations, 2013). This is what H&M wants to create by looking at its interests only. The company produces over 3 billion garments each year which is more than enough. Based on utilitarianism theory, it is difficult to predict if the renewable machine that H&M is creating will be able to meet recycling demand depending on the high production of clothes made by H&M. Finally, it is also difficult to measure the ethical capability of H&M by following the laws and regulations of each country. Different countries have different laws, making it difficult to give an overall score on H&M’s ethical performance.
Recommendations
One of the most effective strategies that H&M can use is working with other fashion industry companies to develop a largescale and more impactful sustainable strategy. It is difficult for H&M to create a well-established and working strategy without involving the other players, especially in collecting and recycling used clothes. This is a section that requires collective action to be impactful in society.
H&M should ensure that they carry out ethical business practices despite the country of operation. Although first-world countries have well-laid procedures on sustainability and ethics, third-world countries may have poor policies and methods for implementing their strategies. This does imply that H&M should take advantage of such laws to engage in the unethical production of their clothes. The company should have a standard ethical procedure across all its countries. This implies that the company will have equal human rights for its employees and equal climate change mitigation efforts and strategies.
Conclusion
Climate change has devastating effects on the clothing industry. It affects the production of raw materials such as cotton, with is essential in clothing production. The COVID-19 pandemic had more devastating impacts on climate change as the world shifted its focus from climate change to Covid-19, leading to the use of more fossil fuel, and plastic production, and halting climate change summits. However, companies like H&M have provided to work hard to mitigate the effects of climate change. It has rolled out several programs, including dropping suppliers who use coal, introducing new non-plastic packaging, investing in recycling machines, and giving coupons for people who return unused clothes, which helps mitigate climate change effects. However, the company should seek more innovative ways to mitigate climate change because the clothing industry is a major contributor to environmental pollution.
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