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H&M Group Makes Moves on Recycled Materials in Annual Sustainability Report

PARIS — While it seeks to stoke sales following successive flat quarters, H&M Group is looking to establish brand equity by upping its sustainability credentials.

“That means that we need to work on making sure that we have really attractive quality for the customers, the relevant pieces, but also that our customers can be confident that they are sourced in a responsible way, that we work on our ambitious climate goals to make sure that shopping with H&M is being part of making the transformation over time to a more sustainable fashion future,” chief executive officer Daniel Ervér said in a call with investors following the release of the Swedish retailer’s annual results.

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The profitability growth aims to decouple from resource use with an increased emphasis on recycling, H&M group head of sustainability Leyla Ertur told WWD in an interview.

The group reached 85 percent recycled or “sustainably sourced” materials in 2023, with the goal of reaching 100 percent by 2030. “Sustainably sourced” includes organic, regenerative and responsible raw materials, including certified responsible wool and cashmere, plus chrome-free tanning for leather. Materials that meet those standards reached 60 percent in 2023. The company’s top two materials are cotton and polyester.

The share of recycled materials was 25 percent in 2023, and the group aims to double that by 2030. Currently 79 percent of its polyester is recycled, but much of that comes from PET plastic bottles and the company wants to move to textile-to-textile recycling. PET was a good solution in the past, but there is debate in the industry if taking that plastic out of the recycling chain that could create new bottles, instead turning it into fabric, is the best way to create a “closed loop” system, Ertur said.

“But now we are looking into heavily textile-to-textile recycling in our product basket because that’s, of course, how you create circularity, how you make sure that you’re closing the loop [and is] very much also aligned with our view,” she said.

That’s easier said than done with the current state of the recycled textiles market — and a goal that took a big hit with the bankruptcy of Renewcell. H&M held about an 11 percent stake in that company, which hit roadblocks getting its fibers into the supply chain despite offtake agreements with various retailers. Renewcell is still looking for a buyer, with bids closing Thursday.

H&M Group Hennes Mauritz head of sustainability Leyla Ertur
H&M Group head of sustainability Leyla Ertur

“It is also quite challenging due to technologies’ investments needs,” Ertur said.

H&M keeps pushing forward on circularity, both with its investment in Syre, and a new textile-to-textile recycler it launched with venture investor Vargas earlier this month that is building a U.S. plant in North Carolina expected to be operational later this year. H&M has signed a $600 million offtake agreement for recycled polyester over the next seven years.

Ertur is clear on the challenges when it comes to customer perception. “The biggest hurdle still comes with…the quality and hand feel of the materials, and the developments that need to happen there,” she said.

New materials’ quality can also affect the design process. To that end, the company is reevaluating its previously stated goal to “design for circularity” by 2025 and to extend that timeline as it ramps up its R&D with a focus on durability.

On the emissions front, the group said it cut 22 percent of greenhouse gases from its supply chain factories, and 24 percent from its in-house owned facilities, from a 2019 baseline. It’s working on its stated goal of cutting absolute emissions 56 percent across all its tiers by 2030.

Much of that initial progress came from moving factories from coal to greener energies, with the number of coal-fired plants in its supply chain down from 117 in 2022 to 67 in 2023. That has come through efforts in collaborative financing, with the company giving factories low or no-interest loans to adapt its energy sources.

Ertur highlighted that this is a collaborative effort aimed to benefit the industry as a whole, as many of the plants are often shared with peer brands. H&M will continue this financing model over the next five years in an effort to move all of its supplier plants off of coal.

The company will also work with its suppliers, mainly dyeing and finishing factories, to upgrade their water efficiency. Getting data on this is another challenge, as suppliers in places such as Bangladesh use drilled well water that isn’t monitored or paid for, so moving factories to municipal water systems is the first step. The company will also put a big focus on recycling water, setting a new target of reducing absolute freshwater extraction and consumption by 30 percent by 2030, against a 2022 baseline.

The company’s report indicated that its resale programs, now available at its brands with an in-person and online mix, come with “inefficiencies and high costs” from the handling process and lack of infrastructure.

Customer adaptation is an added hurdle.

“I think the challenge comes in behavior,” according to Ertur. Building out the resale ecosystem is a key point for the company to hit its circular goals. The group is working on strengthening the customer experience and better curating the assortment of garments. “I still think it is a growing business with a high profit [potential], and that is quite a high topic on our agenda.”

The company is continuing to advocate for the removal of VAT on secondhand sales, which it believes will add more financial incentives and increase accessibility for customers.

Looking at newly implemented and upcoming European Union regulations, the company is working with the EU waste management strategy to divert used clothing into textile-to-textile recycling, and said it welcomed the recent regulations banning misleading green claims, which saw the company abandon its Conscious collection and some other marketing.

“From our side, we truly geared up to make sure that we are fully compliant,” Ertur said. “We are truly working toward both green claims but also other legislations that are coming, because I truly believe this is a great tool for transparency.”

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