H&M, China, and Cotton: Sourcing a Solution?

Description

In December 2021, Hennes & Mauritz AB (H&M), the Swedish fast-fashion clothing retailer, found itself in a difficult position regarding its business in China, one of the retailer’s important markets. H&M was a member of the sustainability organization, Better Cotton Initiative (BCI), which in March 2020 had suspended activities with licensed farmers in the Xinjiang province of China because of allegations of forced labor and human rights abuses against the Uyghur Muslim minority in that region. H&M’s statement of support for BCI’s actions, released in September 2020, had generated a fierce backlash from China. H&M’s business in that country, both online and in stores, virtually disappeared. Complicating the situation, the option of negotiating peace over Xinjiang cotton had now been taken out of the company’s hands by the passage of the Uyghur Forced Labor Prevention Act (HR 1115), signed into law by US president Joe Biden on December 23, 2021, which prohibited “imports made by forced labor into the United States of products made in Xinjiang.” The law would be implemented six months later on June 21, 2022. The European Union (EU), which in October 2021 had promised a ban on imports from the Xinjiang region, was also expected to act on that promise soon. H&M needed to decide how to navigate the tricky and delicate impasse with China. What could the company do about the allegations of human rights abuses in the supply chain when there was no way thus far to irrefutably confirm or deny their existence at the source? And how could it appease China without sacrificing its values and commitment to sustainably sourced cotton? There were few supply options outside China. Additionally, China was a major market. Yet H&M had joined and was committed to the move toward sustainable operations. How could it reconcile the conflicting pressures?

Keywords

business ethics