Sustainability Report - The H&M Case PDF

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This is the mandatory H&M assignment in Financial Reporting....

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Sustainability Reporting - a Comparison

Financial Reporting Autumn 2020

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Introduction The world is constantly changing and as of now it is developing into a more sustainable one. AND the company, H&M that we will review is one of those who are market-leading when it comes to sustainability, and since sustainability and climate change over the years have become a more and more relevant issue companies must implement a sustainability section in their annual report. Therefore we will compare the sustainability information presented in the annual report for H&M with the standard issued by the Global Reporting Initiative (GRI) BUT also give concrete advice to an up and coming smaller clothing brand in regards to this.

Comparison of GRI guidelines and daily operation i H&M 1.1 Stakeholder inclusiveness Stakeholders are a group of individuals that in relation to a company have specific interest in the growth, performance and development of its business and its daily operation. AND WHEN comparing H&Ms stakeholder inclusiveness with the GRI guidelines it can be found that they very well meet up to the requirements for inclusivity of stakeholders. This is since their stakeholders are clearly identified but also separated into four main groups; WHICH are experts, business partners, colleagues and customers. In their annual-and sustainability reports it is presented that H&M also regularly initiates stakeholder engagement in its regular activities, such as daily dialogues and continuous follow-ups that are highly informative and focus on stakeholder reviews, surveys and strategy consultations. Consequently, the various stakeholders are properly engaged which enables them to give feedback regarding the business.

1.3 Materiality In the annual-and sustainability report for the company provided to the public it is apparent that there is a clear materiality assessment being done. This is due to the fact the company distinctly identifies the main factors that affect the business and are relevant as well as important for it to assess. THIS THEY DO BY; bringing up the organization’s positive as well as possible negative impacts that they have on the economy, environment and society. AND in addition to that they also continuously bring light to ways how to improve and better their business and how it is affecting the outside world. WHICH FOR instance is done by long-term investments in sustainable solutions where they allocate resources and time to for instance developing new innovative technology but also through their various collaborations with organisations such as the Ellen McArthur Foundation and WWF. Since H&M directly and openly address the main issues facing them and in regards to that also give out detailed information about what their issues are, why and how they work with them, THEY as a company provide great transparency . AND we also believe that the way they present all of it in their annual reports ALSO is very understandable not only for experts when it comes to sustainability but also for the general public who would like to gather 2

insight, WHICH leads to more people being able to understand that the company’s vision is to lead the change towards a more circular and climate positive clothing business.

1.4 Completeness Financial reporting should contain but above all cover information regarding material topics and their boundaries, in order to reflect significant environmental economic, and social impacts. It is also of great importance that the report be comprehensible to the stakeholders, so that they can make their own assessment of the business. Also, Completeness essentially envelops the accompanying three measurements: the rundown of material themes shrouded in the report, subject boundaries and time. Time: The report that the organization carries out requires a time period and contains a description based on the financial year. Topic boundaries: Organization that follows the GRI standards must present the effects they cause but also the effects they contribute to and the effect to which they are linked. The sustainability and annual report are presented every year. The report contains for example coverage information, essential topics and limits. H&M group highlights the topic of boundaries within a block of text in their sustainability report, but without mentioning it by name. Although they have further analyzed and presented the company’s boundaries in the Materiality matrix, which in particular is new in the financial reporting 2019. In the sustainability report, H&M has acknowledged but also addressed the effects they cause and the effects they contribute to. The business is affected by the big question regarding the water crises which is in the top 10 global risk. At the same time the modeling industry uses billions of cubic meters of water every year (HM group, s.35).

1.5 Accuracy The reported information must be clear and sufficiently comprehensive but also detailed for stakeholders to be able to use in assessing the reporting organization's results. Furthermore, it is important to point out that the information can be expressed in different ways, such as qualitative answers to detailed quantity measurements.

1.7 Clarity It is of great importance that the report is easily accessible and understandable, but also covers important areas for stakeholders who use that information. The report must be complete and comprehensible and can easily be acquired by the shareholders that take part in the report. This means that the report must be easily acquired by the shareholders when it is published, either in printed form or via other channels. 3

Based on the sustainability report presented by H&M, it is aimed at the public and not only at specific stakeholders. It is also important to note that the report is written on clear and concise information that gives the reader an understanding. In addition, the report is easily accessible and useful. At the beginning of the report, it is stated early in the text that the report consists of the GRI standard used to support the text, which contributes to clarity in the report. The content index makes the information easy to read in the report. It is divided into parts of the report. The data is presented in a clear way that eliminates prejudices but also keeps the material objective. An advantage is that the Report is available on the company's website, which again means that it is available to both stakeholders and the public. The report is written in an uncomplicated way, which means that it can be read by anyone. The text is not misleading and does not consist of difficult terms. It is thus very easy to read for the public and stakeholders. Finally, we can state from the analysis that the sustainability report is well done and follows the GRI standard's guidelines.

1.8 Comparability Each organization is tasked with selecting and compiling all the information consistently. Furthermore, the reporting information must be clear so that stakeholders in the organization have the opportunity to analyze changes in the organization. In addition, it is also very important that companies' stakeholders can analyze financial changes to gain insight into how the organization works (GRI 101,2016). H & M's goal is for it to be climate-positive by 2040, thus producing 100 percent sustainable cotton by 2020. Furthermore, 97 percent of the cotton was sustainable in 2019, but they want the change to reach 100 percent by 2030.

1.10 Timeliness Some important points about H&M are mentioned that they are now among the top 5 in the Fashion Revolution's Fashion Transparency Index, they have launched a circular innovation laboratory and 23 supplier factories tested the Higg Index Facility Social and Labor Module (H&M Group, 2019)

1.11 What should a smaller clothing company implement in their business and daily operation? Based on how H&M presents itself, its daily operation and their continuous work to and contribute to creating a circular economy and a more sustainable society. WE believe that H&M provides a great example of a progressive company who is leading the way for a 4

change and innovation where sustainability is taken into great consideration in every aspect of their business. Thus, making them an even better example for smaller clothing companies who in today’s society and all of its uncertainties are trying to get into this field and make their mark in it. AND in order for them to do so we find that following the following points are of most importance and relevance in regards to achieving this. 1. First we have transparency: AND what it implies is operating in such a way that it is easy for others to see what actions are performed. The company should therefore implement an overall sense of openness , communication, and accountability in all aspects of the business. 2. Then we have clarity: Clarity exposes purpose by unveiling expectations. It furthermore, tells people exactly what you want and by clearly stating your message IT reduces misinterpretation and failure in communications. 3. We also believe an assessment of materiality is important: Materiality is reflecting upon your economic, environmental and social impacts. But also, influencing the decisions of stakeholders. 4. And last but not least it is of utmost importance that company’s take responsibility: This implies being accountable for your business decisions and to take them with regard to the economy, environment & the society.

Final reflections and conclusion So, in conclusion what can we now say about sustainability and companies who are trying to find their way in adapting to it? Well, first and foremost we believe that having a progressive approach is important. This implies having an optimistic outlook and attitude towards various obstacles and uncertainties from the outside world and acting upon their individual circumstances in a way that pushes innovation and change. AND this leads us to the second point, which is to adapt to changes in society and its increased requirements from big corporations AND ALSO the general public and their consumers. Because, since we live in such a high paced society were information is more available than ever and where we have a consumer's market where there exist overflowing amounts of substitutes for every need that an individual may have, WE in conclusion therefore believe that companies must adapt, be transparent, take responsibility and most importantly not shy away from taking a stand in the fight for a more sustainable world and overall clothing business.

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