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

13 Pages Posted: 14 Nov 2022

See all articles by Vidya Mani

Vidya Mani

University of Virginia - Darden School of Business

Bidhan L. Parmar

University of Virginia - Darden School of Business

Jenny Mead

University of Virginia - Darden School of Business

Yusi Liu

Independent

Abstract

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?

Excerpt

UVA-OM-1781

Nov. 10, 2022

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

In December 2021, Hennes & Mauritz AB (H&M), founded and based in Sweden and the second-largest global 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 cotton sustainability organization, the Better Cotton Initiative (BCI), which in March 2020 had suspended activities with licensed farmers in the Chinese province of Xinjiang because of allegations of forced labor and human rights abuses against the Uyghur Muslim minority in that region. H&M had released a statement of support for BCI's actions in September 2020, and several months later, faced a backlash from China, with its business in that country virtually disappearing both in stores and online. Complicating the situation, on December 14, the US House of Representatives had voted unanimously to ban imports from the Xinjiang region over the concerns regarding human rights abuses against the Uyghur. The US Senate was expected to pass the bill, and President Joe Biden had already said he would sign it. 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.

. . .

Keywords: business ethics, cotton, retail industry, China, H&M, supply chain management, sustainable operations, labor and human rights abuses, public relations, cross-cultural business

Suggested Citation

Mani, Vidya and Parmar, Bidhan L. and Mead, Jenny and Liu, Yusi, H&M, China, and Cotton: Sourcing a Solution?. Darden Case No. UVA-OM-1781, Available at SSRN: https://ssrn.com/abstract=4275064 or http://dx.doi.org/10.2139/ssrn.4275064

Vidya Mani (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Bidhan L. Parmar

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Jenny Mead

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Yusi Liu

Independent

United States

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