June 20 (Bloomberg) -- Hennes & Mauritz AB says it has a solution to tight cotton supplies and the piles of old garments choking landfills worldwide: convince consumers to recycle cast-offs by offering discounts on yet more clothing.
H&M, which won notoriety three years ago when some of its unsold inventory was shredded and left for trash on a New York City street, says the initiative will limit waste in the fast-fashion industry the company helped spawn.
The program started in February and will be in all of H&M’s 2,900 outlets by yearend. It may bolster the company’s image as fallout from the Bangladesh factory collapse in April weighs on the garment industry, and it will help attract shoppers while H&M struggles to increase revenue.
“This is a good thing for getting people into their stores,” said Bryan Roberts, an analyst at researcher Kantar Retail. “It’s often the case that green initiatives go hand-in-hand with commercial objectives.”
The Swedish retailer collects clothing of any brand and in any condition in white and green boxes in stores. Switzerland’s I:Collect AG buys the garments and, depending on quality, either resells them or gives them new life in things like cleaning cloths and stuffed toys.
“We don’t want clothes to become waste, we want them to become a resource instead,” H&M sustainability manager Henrik Lampa said in the retailer’s headquarters overlooking Drottninggatan, a busy shopping street in Stockholm. “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. While other retailers have launched similar campaigns -- Marks & Spencer has a U.K.-only effort called “Shwopping” -- 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,” said Kate Ormrod, an analyst at Verdict Research in London.
Emma Enebog, head of donations at Myrorna, a chain of second-hand stores affiliated with the Salvation Army, cautioned that while the vouchers may make sense for H&M, they limit the ecological value of the program.
“There is a risk that the benefit to the environment will disappear” when the reward is tied to buying more, Enebog said.
H&M -- which lost the title Europe’s biggest fast-fashion retailer to Inditex SA in 2006 -- has posted declining margins due to increases in raw-material costs and Asian wages, where it makes the bulk of its products. The company said yesterday that same-store sales dropped 4 percent and net income fell 11 percent to 4.66 billion kronor in the three months through May, missing analyst estimates.
The stock fell 2.2 percent to 220.1 kronor at 2:07 p.m. in Stockholm. It has fallen 8.9 percent in the past year, while Inditex, owner of the Zara chain, has surged 24 percent.
In a world where people buy multiple pairs of skinny jeans, T-shirts, and tops in rainbows of colors while droughts and floods wreak havoc on crops, cotton has been particularly volatile. The price of cotton has risen 13 percent this year after falling 18 percent in 2012. H&M doesn’t disclose the share of its costs that are represented by cotton.
“One of the major challenges is the limited resources on our planet,” H&M’s Chief Executive Officer Karl-Johan Persson said in an interview on the sidelines of a Stockholm conference. “This global clothing collecting initiative feels great.”
To grow enough conventional cotton to create a plain T-shirt requires as much as 15 bathtubs of water, according to H&M. The retailer, which sells T-shirts for $5.95, is the world’s biggest user of organic cotton, according to Textile Exchange. The company 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.
A hitch in turning last year’s magenta leggings into 2014’s “it” jacket is a lack of cost-effective recycling technology and the limited responsibility that producers have for used garments.
Textile recycling lags far behind paper. In Sweden, a country so good at recycling it imports trash to fuel heat and power plants, more than half of the 15 kilograms of clothing and home textiles every person uses a year is thrown away, according to Sweden’s Environmental Protection Agency.
“We need to be able to do this very cheaply,” said Gunnar Henriksson, a professor in wood chemistry at the KTH Royal Institute of Technology in Stockholm who has invented a new method for regenerating textile fibers, which he says could lead to better textile recycling. “If this could cost an unlimited amount, this wouldn’t be that difficult.”
H&M is investing the bulk of the proceeds it gets from selling garments to I:Collect in research on recycling textile fibers, though it declined to say how much those investments amount to. While some new recycling techniques appear promising, it will be a half-decade or so before they’ll have a measurable effect, said sustainability chief Lampa.
“We can’t just sit and wait for the technology to take off,” Lampa said. “We believe we have a role to play.”
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