Hennes & Mauritz (HMB:SS), whose 2,900 H&M clothing stores have helped make it Europe’s No. 2 fashion apparel chain, suffered a public-relations black eye in 2010 when some of its unsold inventory was shredded and left for trash on a New York City street. These days, H&M executives figure they’ve found a way to use clothing waste to burnish the retailer’s reputation. A program started in February encourages consumers to recycle their castoff garments by offering discounts on yet more clothing purchased at its stores. It will be rolled out at all H&M stores by year-end and could attract shoppers as the chain struggles to increase revenue.
By potentially alleviating tight cotton supplies and reducing the piles of old garments choking landfills, the recycling push may also bolster the company’s image in the wake of factory safety incidents in Bangladesh, where H&M produces garments. “This is a good thing for getting people into their stores,” says Bryan Roberts, an analyst at researcher Kantar Retail. “It’s often the case that green initiatives go hand in hand with commercial objectives.”
The Stockholm-based retailer collects clothing of any brand and in any condition in white-and-green boxes in stores. Switzerland’s I:Collect buys the garments and, depending on quality, either resells them or gives them new life in things such as cleaning cloths and stuffed toys. “We don’t want clothes to become waste; we want them to become a resource instead,” says H&M sustainability manager Henrik Lampa. “We want to make new commercial fibers out of this, to make new clothes and textiles.”
For every plastic bag of clothing collected in Sweden, H&M gives the donor a 50 kronor ($7.80) discount on purchases of 300 kronor at its shops. Other retailers have launched similar campaigns—Marks & Spencer (MKS:LN) has a U.K.-only effort called Shwopping—but H&M says it will be the first fashion company to collect garments globally. While H&M “does make a profit from the sale and recycling of unwanted clothes, the vouchers help drive footfall into stores and encourage purchases, boosting sales,” says Kate Ormrod, an analyst at researcher Verdict in London.
Emma Enebog, sustainability strategist at Myrorna, a chain of secondhand stores affiliated with the Salvation Army, cautioned that the vouchers may make sense for H&M, but they limit the program’s ecological value. “There is a risk that the benefit to the environment will disappear” when the reward is tied to further purchases, she says.
H&M has posted declining margins due to increases in raw-material costs and wages in Asia, where it makes the bulk of its products. Sales at stores open at least 12 months dropped 4 percent and net income fell 11 percent, to $691.4 million in the three months through May, missing analyst estimates. The price of cotton has been particularly volatile, rising 13 percent this year after falling 18 percent in 2012. “One of the major challenges is the limited resources on our planet,” says H&M Chief Executive Officer Karl-Johan Persson.
To grow enough conventional cotton to create a plain T-shirt requires as many as 15 bathtubs of water, according to H&M. The retailer, which sells T-shirts for as low as $5.95, is the world’s biggest user of organic cotton, according to Textile Exchange, a non-profit that advocates for sustainability in the garment industry. H&M says it expects to get all its cotton from more sustainable resources such as organic and recycled cotton by 2020, up from 11.4 percent last year. H&M will pump the bulk of the proceeds it gets from selling garments to I:Collect into research on recycling textile fibers, although it declined to say how much that will be. Still, it will be a half-decade before there’s a meaningful effect, says sustainability chief Lampa. “We can’t just sit and wait for the technology to take off,” he says. “We believe we have a role to play.”