Apparel Sourcing Intelligence - Worldwide

H&M talk analysts through strategy for “Fair, living wage”

Though H&M’s share price has outperformed the Stockholm Stock Exchange since its November 25  Living Wage announcement, it called its first-ever analyst presentation on the issue on December 10 and has devoted a significant amount of web space to its plans.

Its presentation stressed that ” the ambition of this project is to ensure that all workers earn a living wage, with annual reviews, union representation, ongoing employee training and dialogue, and a range of other measures at all strategic suppliers in 750 factories representing 60% of production. Its published supplier list contains over 1,000 factories.

H&M said it does not wish to set factory wages directly, but will use the Fair Wage Methodology developed by Daniel Vaughan-Whitehead of the ILO. Its website shows how this does not contain an unambiguous definition  of a “living wage”, but takes great pains to ensure wages are seen by all stakeholders as fair. This might create principles opposed to many activists’ definition of a Living Wage – for example, if  workers believe that untrained new recruits should have the same basic wage as machine operators with ten years’ experience, a family at home to support as well as a cluster of home-village dependants.

The company has announced an advisory board for the project – long on activists, international civil servants and global employers’  federations, but with no undercapitalised manufacturers, though it does include the well-heeled,  Chinese compliance-enthusiast manufactuere, the Crystal Group.

H&M will be signing a pilot agreement with 3 factories (2 Bangladesh, 1 Cambodia) in which it will guarantee to buy 100% of production for 5 years, in order to get better insight into the practicalities of worker conditions and improving productivity.

H&M seems confident that higher wages can be offset by improving Cambodian and Bangladeshi productivity in much the same way that China has maintained competitiveness after years of double digit wage increases and minimum wages which range from roughly RMB1,000/month (US$165) to more than RMB1,500 (US$247) depending on the region.

The analyst reports we have seen are substantially less concerned about the effect of compliance on the bottom linbe of H&M and its competitors than on challenging sales conditions in key markets