Responsible purchasing

Responsible purchasing practices

We have high expectations of our suppliers, in terms of quality, prices, lead times and compliance with our Sustainability Commitment. Demanding positive change from our suppliers is one thing, but we also need to consider how our own decisions affect our suppliers in their ability to meet our standards. This has an impact on how we design, plan and purchase our collections.

The challenge

Late changes to a product’s design or poor communication with our suppliers can lead to tight production lead times. This can result in inefficiencies and affect the working conditions at our suppliers’ factories and the quality of the products. H&M aims to ensure that our own purchasing practices do not conflict with the requirements of our Sustainability Commitment. This can sometimes be difficult as we strive to meet the demands of our customers. Regular mutual feedback, open communications and clear expectations all play an important role in overcoming this challenge.

A partnership approach

Long-term partnerships with our key suppliers provide mutual benefits. Together with our suppliers we can plan ahead and learn from each other, enabling us to develop and grow together. For our suppliers, being a good partner to H&M includes actively working towards full compliance with our Sustainability Commitment, replacing the Code of Conduct in February 2016 but keeping the same strict sustainability standards. Besides that, we have added an aspirational level of performance which means our suppliers should continuously strive beyond compliance to make improvements. Showing this commitment brings related benefits, such as long-term order planning and stable orders over time. All factories have a sustainability performance score which is clearly communicated to our suppliers.

Price setting and payments

We think an honest approach and mutual transparency are the basis for a good business partnership. Prices naturally play a part in our supplier selection process, alongside factors such as capacities, lead times, quality and compliance with our Sustainability Commitment.

To be able to negotiate prices with us, our suppliers need to have a clear picture of H&M’s expectations. In return, we make sure that our merchandisers have good knowledge of both reasonable market prices and our suppliers’ costs in order to agree a fair price. We follow the ethos of "negotiating, not bargaining". Payment procedures for our chosen suppliers are clearly agreed in advance and our policy is that we will pay all invoices on time.

Regardless of the price that might be offered, however, we would not consider a supplier that does not comply with the minimum requirements of our our Sustainability Commitment or our quality standards.

Communication is key

We have a direct relationship with our suppliers and meet with them on a regular basis. We evaluate our suppliers twice-a-year and discuss the results together. As part of our commitment to good communications, we strive to apply pre-order product planning, with early information about product specifications, wherever possible.

With our key suppliers we develop long-term capacity plans about six to 12 months in advance and aim to plan our purchasing process accordingly. These planning systems help suppliers to monitor their capacity, performance and adherence to our Sustainability Commitment.

As a fashion company in a fast-moving market, we need to meet our customers’ demands. This can sometimes mean late changes on product orders. Intensive capacity and pre-order planning alongside our suppliers, with clarity on volumes and lead times, can help to minimise this.

We want our suppliers to be good partners to H&M. We reward suppliers that show strong improvement, in terms of business performance and compliance with our Sustainability Commitment, with stable orders or higher order volumes. Our commitment to suppliers is clear – through working with H&M, we want them to grow and develop further.

Supplier development

In order to support the development of our suppliers, H&M places a focus on sharing knowledge and providing training. We think this contributes to a more sustainable supply chain. Our production offices around the world are responsible for identifying the right suppliers and allocating production. Our buying department and merchandising teams receive regular training on sustainability issues. Those responsible for placing orders with suppliers are required to understand our Sustainability Commitment’s grading and how their decisions can impact on our suppliers. Sustainability Commitment compliance determines which suppliers can and cannot be used and can also play a role in defining order quantities placed with certain suppliers.

Ending supplier relations responsibly

While rejecting suppliers could be seen as a quick fix to react to instances of non-compliance, H&M commits to work together with our suppliers to make long-lasting improvements through our partnership approach. We clearly inform suppliers about the business risks that can result from noncompliance and seek to educate them and support their development.

Where there are problems, we work to encourage improvements. Despite this, sometimes a situation can arise where we need to end a relationship, non-compliance with our business requirements, such as the Sustainability Commitment. Especially in economically difficult times, the termination of a business relationship has a significant impact and can leave thousands of garment workers unemployed. H&M therefore not only has responsibilities to a supplier during a relationship, but also when a relationship comes to its end. When a relationship needs to be ended, we commit to a reasonable phase-out period, usually 1–1.5 years, and inform our suppliers around three to six months in advance, in order to give them the time and opportunity to find other customers.

Download Sustainability Commitment

Conscious Actions

Find out all we do in order to choose and reward responsible partners.

Sustainability Commitment

Here you can find our full Sustainability Commitment.

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