H&M’s Big Bet on Sustainable Supply Chains (And Why It’s Working)

Paul Goff, Traceability and Sustainability Product Manager at H&M, shares how the fashion giant is using technology to unlock transparency, decarbonise its supply chain, and set a new standard for sustainability in the apparel industry. From navigating global supply chain complexities to fostering lasting partnerships with suppliers, Paul dives deep into the practical steps H&M is taking to drive change.

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Links & resources:

• Early stage innovation at H&M
• Green investment in a low carbon textile industry

Transcript

Paul Goff [00:00:00]:

Who are you not listening to? Listening as a skill is just really fundamental in this space because we're working with, say, if we're talking about the Scope three instead of partners. So really kind of understanding and empathizing with those partners, you know, where are they? What are their challenges? Through that sort of deeper listening that really kind of provides the foundation to then go and solve rather than kind of think, oh, okay, this is the solution, how we're going to push it onto our supply base. A little quote in here. It's that most people do not listen with their intent to understand, but they listen as an intent to reply. So anything that can be done to build on that, workshopping with your strategic partners on key topics, on key ambitions, and then building solutions off the back of it, I think is really, really critical.

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Saif Hameed [00:00:51]:

I'm Saif Hameed. Welcome to the State of Sustainability Podcast, a show for professionals transforming corporate sustainability strategies brought to you by Altruistiq. The apparel industry is notorious for having complicated, opaque and long supply chains that are difficult to maneuver, difficult to get change to happen, difficult to really navigate. Worldwide apparel is also home to some of the most exciting decarbonization work and some of the most ambitious climate programs, programs that can really have an impact pretty much in every corner of their supply chain. So who better to speak with on this than hm? HM is known for some of the most groundbreaking initiatives in the space, certainly over the last several years. We're excited to welcome Paul Goff, traceability and Sustainability Product Manager at hm, who's working on the front lines of supply chain traceability, engagement and decarbonization. Paul, it's really great to have you on the show.

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Paul Goff [00:01:52]:

Great. Thank you so much, Saif. Pleasure to be here.

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Saif Hameed [00:01:55]:

I'd love to give our audience a bit of an understanding on your role. It's a bit of a mouthful. There's a lot of exciting stuff there. What is it that this role contains?

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Paul Goff [00:02:04]:

Yeah, perfect. Thanks. Thanks, Saif. So I think, first things first, I'm based out of Hong Kong, and so just from a geographical perspective, you know, the H and M production organization is based out in Asia. And so my role really sits across the production sustainability team and the technology team. So it's a product owner role. So essentially what my day job looks like is really kind of understanding the business need within that sustainability context, whether that's social or environmental, and then really deploying technology within our supply chain to understand the impact of our value chain. And so that really kind of encompasses the compliance side as well as some of our ambitions, which, as you said in your introduction, Saif, it is really kind of industry leading ambitions that we have within our organization.

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Saif Hameed [00:02:56]:

And Paul, what brought you to this role? Would love to get into a bit of the journey. It's been an exciting one for you.

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Paul Goff [00:03:02]:

Yeah, that's right. So I'm not an old timer in sustainability space. My background, maybe just very briefly has come from, you know, consulting background. So with Deloitte and when we're some consumer companies, moved over to Asia about 10 years ago, you know, working in, whether it's like logistics or in the retail sourcing side, I had quite a series of events that unfolded in my life around about four or five years ago where, you know, my son was born, you know, big life change. The company that I was working at relocated from Hong Kong to Singapore and I was also diagnosed with cancer. All within the space of really just a couple of months. So once the dust had settled on a lot of those, although I'm still getting used to being a father, really kind of answering the question of like, what do I want to put my energy into from a career perspective and sustainability. I mean, thanks to my wife for putting that one on the table.

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Paul Goff [00:03:57]:

It was something that really resonated with me. So since then I've been sort of pivoting my career to working in sustainability, both previously at VF and then now sort of the last three years at H and M and loving the space. I think it's just so exciting. Really kind of purposeful every day. And yeah, I love working with my team and the stakeholders who also kind of have that passion for positive change in our planet.

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Saif Hameed [00:04:23]:

It's so great, Paul, to come to the impact space after, you know, obviously a really dramatic moment where you just sort of realize what you want to focus on. But then coming in also, I think really at the edge where you can have the most impact as well. I think both of those roles at BF&H and M, you're kind of really at the front lines and able to do so much. And Paul, could you tell us a bit about some of the challenges that you face in the supply chain? Either regional challenges or just challenges based on different parts of the value chain. What is the hard stuff that makes your role so valuable in the organization?

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Paul Goff [00:04:59]:

Yeah, so you kind of teed up in the introduction, Saif, where you're kind of talking about the complexity of the apparel supply chain. So you know, that global, long, multi tiered supply chain, it's, yeah, global nature, its fragmentation. It is also the resource intensity of some of the processes and then sort of migrating, you know, some of that legacy capital invested production equipment to, you know, those greener energy sources is really kind of a key focus for us.

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Saif Hameed [00:05:30]:

Well, so many things I want to get into off the back of that. One of the things that I've noticed, having grown up in Pakistan and still visiting once every year or so, is that the fact that the energy grid is so unstable and so unreliable almost acts as a catalyst for the local textile manufacturers to actually start transitioning to renewable energy systems which they have on site. Are you seeing that kind of repeated across, you know, maybe a few different geographies where you guys are active?

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Paul Goff [00:06:02]:

Yeah, it's a great question. There's a couple of things in, in there, that kind of energy security piece. So first of all, I was in Bangladesh earlier on this year and having conversations with the, you know, production leaders and factory owners there and you absolutely right. The grid systems or even from say like a natural gas perspective in Bangladesh, when those go down to be able to keep their facilities going, actually having rooftop solar or to have biomass boilers that are able to secure that energy, which in turn from a decarbonization perspective, that does in a number of cases have lower carbon impact for some of those technologies. So I think if we look at the overall kind of transition of the industry, which is going to take a number of years. Yeah, some of these low hanging fruit, when we talk about the efficiency play, you know, the business cases it's, you know, put forward, that's what really kind of wins it and gets it across the line in this current space that we're in at the moment. So yeah, I think you've hit the nail on the head in terms of energy security. And I think I would also just add a more broader point here to say that every country is very different.

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Paul Goff [00:07:21]:

There is like very different dynamics. If we look at a production facility in say China, where they've got a centralized purchase steam facility, where that is piped out to a number of the different factories within that park, versus, as I said, Bangladesh, where it's like natural gas as a predominant fuel within that country, versus Vietnam, there's such different dynamics, you almost have a different problem to solve in each of those countries. So this certainly is a challenge, that sort of difference across country and region.

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Saif Hameed [00:07:54]:

Yeah. You know, one thing that I've found interesting, so I often get asked about whether I see the southern hemisphere being intrinsically behind on climate change mitigation work versus the Northern hemisphere and whether that's likely to change. What I find much more valuable is to look at value chains, because, for example, I find actually there are components of the textile value chain and apparel value chain everywhere in the world that are more or less best in class to the same standard, basically. Like, if you take, let's say a large textile business in India or Sri Lanka or Bangladesh, the stuff that they're doing is not necessarily any further behind what I would see in the UK or Europe for a company of the same revenue bracket in a different sector, if that makes sense. And I think that's because the pressure is so high on these companies and the competition is also so fierce that they're all trying to push the bar on innovation to see just how far they can raise it. Is that your observation as well?

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Paul Goff [00:08:53]:

Yeah, I would certainly see that. I would also just like add that there is a very broad range of capability out there if you think about, like the number of production facilities across all of those tiers. So we've got, if you look at the apparel value chain, we have at the start, kind of tier four, so you're talking about raw material cotton through to your ginning, your spinning, weaving, dyeing, and then your cut and sew. Each one of those different elements within the value chain has a very different sort of dynamic. So, for example, your spinning facilities are going to be a lot more electrified there versus your dying facilities, really, where there's a lot of energy consumption in that dying process. This is kind of where we're putting a lot of focus in on that sort of tier two space. And I think I would come back to your question, Saif. The kind of the split of maturity, I think is very, very broad and wide.

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Paul Goff [00:09:48]:

And I think that could be at a country level, regional level and global level. So I would say that, you know, there's good and bad supplies in everywhere on the planet. It's really around finding those right partners that are strategically aligned with your ambitions and what you're trying to achieve as a brand, and then really kind of ensuring that you have alignment within the business to continue that partnership longer term.

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Saif Hameed [00:10:13]:

And Paul, what is a good partnership look like? Like, what are the ingredients for an effective engagement on both sides of the fence? Like, what do you see you guys bringing to the table as H and M, but then also what do you see a good supply supplier bringing to the table in terms of what they're willing to put into the partnership?

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Paul Goff [00:10:31]:

Yeah, it's something that we focus on at H and M a lot. The very nature of apparel and the season to season, the buy to buy, you know, type of Transactions within the supply chain really kind of do push this kind of supplier like buyer relationship to be quite transactional just by its nature in the industry. H and M, you know, this is something that is absolutely, you know, front and center and it has continued to be a focus over the last couple of years and really kind of identifying who are our strategic partners so we can give them, you know, long steady volumes. And I would actually say that this starts like kind of more on the commercial side. So all those kind of commercial like dynamics in play, whether it's the right price, the right service levels in terms of lead times, quality, all of these elements plus sustainability needs to be in that evaluation. Once you've got that kind of alignment, that long partnership, then we can then sort of layer on all the sort of the benefits from a sustainability perspective on top of that. So from our side we really do invest heavily with our suppliers. So once a supplier works with us, we have a minimum requirement in terms of a lot of the sustainability topics and that's a right to operate at that baseline to ensure that all of our facilities kind of meet that level.

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Paul Goff [00:12:07]:

And if they don't, it's an absolute no go. And then really kind of putting in place capability development programs from our side. So we're truly got skin in the game with people, you know, working, you know, partnering with facilities. You know, we've touched on the decarbonization and that kind of energy efficiency. We've got energy efficiency engineers, teams of that are going into factories and really partnering with our production sites to drive that efficiency piece. So that's kind of really our, our part and that partnership plus from a technology perspective and ease of doing business. So we have a very, you know, mature technology landscape and supply portal, for example, where we can almost like tightly couple the relationship through technology and then sort of on the other side from the supplier side, you know, really kind of to be aligned with our ambitions. We haven't really talked so far around some of H and M's ambitions, what we're expecting of our suppliers.

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Paul Goff [00:13:05]:

And so for us to really kind of communicate that and to ensure that our suppliers really understand like this is the journey that we're on, like kind of are you with us? It's very, very important. So what we expect from our suppliers is a really kind of a deeper engagement around some of those longer term objectives which are very important to us. So that's our expectation from the suppliers that we work with.

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Saif Hameed [00:13:28]:

And Paul, you've articulated a wide range of sort of micro interventions going into the factory helping with the energy efficiency. I know there's a lot of cool stuff that H and M is doing on waste as well and trying to bring better waste management practices into the value chain. Also, is there stuff at a macro level? I mean, we touched a little on renewable energy systems, for instance. Is there stuff that you guys are doing on the policy front? I saw the news around the big Bangladesh program around renewable energy financing. What's happening at that kind of macro level?

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Paul Goff [00:14:01]:

Yeah, so it's a very important part of our approach and it's something that we have significant teams in that sort of, we call it the public affairs side of our business where we're really kind of engaging in that sort of energy policy and engagement with local and regional governments on whether it's the social side, ensuring that there's social protection or on the energy and water side, for example, in the environmental piece. And so what does that look like? You know, it's a lot of like engagement with whether it's like Europe or the U.S. you know, from a policy perspective and then ensuring that those policies really kind of meet what the industry really needs to transform itself. You know, there's been a recent example in Indonesia where kind of opening up, you know, the req so a, an ability to draw down on renewable electricity into facilities which wasn't previously available. You know, H and M played a key role there and you've hit on a couple of other examples where we partnering with other brands. So it was bestseller and H and M and the Bangladesh example, so wind farms and that type of investment to ensure that, you know, through those power purchase agreement opportunities that we're also playing in those spaces, maybe just to kind of spin back out and like talk about some other elements within the overall piece would be around kind of innovation. Innovation is kind of really key for us.

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Saif Hameed [00:15:39]:

Where is innovation happening that you're excited by and proud of and where is innovation actually lagging? Where you'd love to see much more action on?

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Paul Goff [00:15:48]:

Yeah. So how we look at innovation at H M, there's really kind of three buckets, like first of all like seed scale and then operationalize. So the H and M Foundation is really an organization that's kind of separate from hm, but there's some close partnerships there where we really look to invest in those very early stage innovations. And we've recently pivoted. There's something called the Global Change Award where we identify those startups really in that decarbonization space. So we're kind of aligning out our ambitions to this very early stage innovation piece. And so a few examples here. So textile Genesis on the traceability side they were as part of this and now as a supplier of mine that I work with on the traceability and that sits in our portfolio also.

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Paul Goff [00:16:41]:

Actually I recently came back from Cambridge University where Petty Flea was a smaller brand that has some kids clothes where they have a very unique material that actually grows, you know, with the kid as they grow. So essentially you can buy, you can buy a garment for a kid at 2 years old and it will still fit them at 3.

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Saif Hameed [00:17:02]:

Oh wow.

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Paul Goff [00:17:02]:

It's a beautiful, beautiful product. We met the founder there and she was part of that Global Change award and had gone through. It's basically funding that we give, you know, about 2 million euros grand plus. It's an accelerator program. So it's that very early stage. That seed piece that we invest in. There's a second element that I mentioned around scaling. So this is the H and M Group ventures.

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Paul Goff [00:17:28]:

So this is typically your kind of series A and series B investment. A few examples in here. So colorific, they're based out of the uk. It's like a bio based die. So there's a number of benefits here where it's obviously from a chemicals versus bio based dye. There's huge benefits from that both in the production and in the consumer end of that particular transition as well as even kind of a lower temperature required for that dyeing process with color effects. Another example is SmartX where is during the spinning process we're using kind of cameras and AI technology to read as the spinning process continues in that and that weaving process we're able to identify those defects very early in the process and then you know, reducing any of the kind of production issues and quality control. So that's H and M Group ventures and then the sort of transition finance or green finance initiative which is really that okay, how can we deploy capital into the supply chain and that operationalizing piece.

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Paul Goff [00:18:39]:

So as I said, if you're a strategic partner, you have access to a number of different funding mechanisms. It's certainly not like a one size fits all because it's going to be very different depending on the supplier, depending on the technology that's used. But there's things like waterless dyeing that we're deploying into operations. So again as I've mentioned that tier two, there's a real focus from a decarbonization around that tier two. So there's things like that where that 500 million euro fund of green Finance initiative is really Kind of being deployed into the operations of our value chain.

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Saif Hameed [00:19:18]:

Paul, if I was to ask you maybe the inverse side of this question, which is, let's say that you were an innovator today and you're out there looking for an opportunity to create an innovation that is going to bring create lots of impact and also create lots of commercial value, what is it that you would innovate for the apparel sector and value chain in particular? Like, are there some big unmet needs, some areas that you think more entrepreneurs should get into or more scale needed?

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Paul Goff [00:19:47]:

Yeah, it's a great, great question. And I think what I love about the apparel industry is that it is so diverse. If we look at everything from regenerative agriculture for cotton through to end of life and that whole like circular piece and a lot of change and transformation that's going on at that end of the supply chain and everything else in between, it's an old industry. We're talking, you know, a 300, 400 year old industry. Things have changed, but they haven't changed significantly. There is a huge opportunity for each of those spaces along the entire value chain for innovation. So I think it's kind of a bit of a cop out on your question, but I would say that I'm seeing innovation in kind of all of those spaces. But maybe just from a pure, you know, push from a policy perspective, there's certainly a lot that's going on in terms of extended producer responsibility and that end of the supply chain.

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Paul Goff [00:20:50]:

I think that's driving a lot as well as obviously decarbonization. We haven't spoken about it yet, but if I just talk briefly to our ambitions within H and M. So we have a net zero target for 2040 and that covers scope one, two and three. It's an absolute target. So really kind of a decade before many of our competitors and then a negative 56% for 2030. So this is really, it's an extremely tough challenge to meet because of that shared resources within the value chain. You know, we work, you know, within the factories that work in, you know, there's other brands that are also there. So you know, we really kind of need to have this sort of collaborative approach and this, you know, strategic partnership there.

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Paul Goff [00:21:36]:

So yeah, coming back to your question, you know, really kind of the decarbonization piece within production is really kind of key for us, Paul, if we segue.

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Saif Hameed [00:21:46]:

A little onto this, the challenge of bringing along manufacturing partners that you share with other brands. We had a similar conversation with Charles Kahn, Sheriff Patagonia and the approach that he articulated that Patagonia takes is he said that they look to take out the mortgage and charge other brands the rent. And what he meant by that is that Patagonia might be the first mover on an intervention, and then they look to bring in other brands to kind of claim their part of the program. Is that a little like the approach that you guys are taking? I mean, I look at Bangladesh, for instance, which, as you said, you've. You've managed to bring in your peers as well to collaborate. I'm sure you have more of that sort of stuff going on around the world.

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Paul Goff [00:22:31]:

That's right.

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Saif Hameed [00:22:32]:

Is that a winning strategy?

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Paul Goff [00:22:33]:

Yeah, I mean, I think every lever that is available to us, we're looking at kind of pulling on those. And, you know, collaboration is absolutely key. And we see ourselves like, being part of. So we think about, like the Apparel Impact Institute or Cascale, there's a number of others that really kind of are vehicles for bringing brands together to then deploy capital into that transformations that's required at the supplier side. And I know we've mentioned that Colin's going to be on your podcast a number of weeks. He has this real vision of, like, focusing on the top, you know, 1500 facilities globally, because that is 80% of the emissions. So if we can really kind of collaborate as an industry around those 1500 facilities, that really kind of does take us, take us forward, really kind of drives that change through, that prioritization. But we really do need to be kind of locking arms across brands.

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Paul Goff [00:23:30]:

And there's a number of. A number of forums, you know, whether that's at the CEO level or the sustainability lead level, that really kind of come into play. So, yeah, I think there's a number of levers there that all need to be pulled to kind of really drive this change. But we certainly see ourselves as a leader kind of pushing this agenda in the industry.

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Saif Hameed [00:23:51]:

Do you think that digital passporting is going to accelerate a lot of this as it drives transparency, maybe as it drives additional use cases on top of transparency?

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Paul Goff [00:24:02]:

It's a great question. And the way that I see it is that the digital product passport really provides the foundation of the direction of travel that the industry needs to go in. And, you know, the moment if you look at, you know, trying to understand the impact of a certain product, you're going to have different measures through different mechanisms. So the digital product passport is that vehicle and is that foundation to bring all of the data points together. And then within that passport, say, for example, the PEF So the product environmental footprint and that work that is currently underway due to be finalized like next year, that will then be a plug into that passport so that you have the vehicle of that passport with the product and then you can add in, you know, these various, like, data points. And through espr, which within Europe is the eco design legislation, kind of looking into the crystal ball and how that might evolve. I think there's a lot of opportunities there as well with how the digital product passport, PEF and then kind of ESPR can then sort of ratchet the evolution of having lower impact products in the market. So I think, yeah, to come back to your question, I feel like the digital product passport is a starter and I hope that that will kind of evolve with various methodologies that could be part of that as the industry evolves.

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Saif Hameed [00:25:30]:

Super exciting. And certainly I think a lot more innovation to come. Paul? Paul, Just as we sort of wind up, the question we usually ask people on this podcast is if you think about our listeners as typically being others in your shoes in other organizations, is there any advice that you'd offer to them as they look to build their supply chain engagement programs, as they look to incorporate digital tooling, you know, any of the sort of bases that you cover? What is the one most important piece of advice that you'd want to share?

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Paul Goff [00:26:01]:

Yeah, I would keep it very simple, Saif. I would coin it as like, who are you not listening to? I think like listening as a skill is just really fundamental in this space because we're working with specifically, say, if we're Talking about the scope 3, it's a set of partners. So really kind of understanding and empathizing with those partners, you know, where are they, what are their challenges? And you know, through that sort of deeper listening that really kind of provides a foundation to then go and solve rather than kind of think, oh, okay, this is the solution, how we're going to push it onto our supply base. I think just a little quote in here is that most people do not listen with their intent to understand, but that they listen as an intent to reply. I kind of really like that because I think it's very simple but quite difficult to do. So anything that can be done to build on that, whether that's sort of like workshopping with your strategic partners on key topics, on key ambitions, bringing those conversations together to have that sort of deeper listening and then building solutions off the back of it, I think is really, really critical. And yeah, just kind of getting, getting the most out of, you know, for me specifically looking kind of with my sort of digital and sustainability hat just really kind of ensuring that the team is well looked after ensuring that kind of team engagement ensuring that they're really kind of growing and developing they've got that right balance that you know ourselves as a team, you know we're plugged into whether it's sustainability team or the business team to really kind of solve this problem together because we absolutely can't do it in isolation so we need to make sure we have a seat at the table at all of those conversations.

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Saif Hameed [00:27:45]:

So true. And Paul, I'm going to try and steal that piece about listening with the intent of replying rather than listening with the intent to understand. Thank you so much Paul really enjoyed this conversation. I'm looking forward to our next catch up as well where we could kind of take things further but I've really appreciated having you on this show. Thank you so much and we'll speak again soon.

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Paul Goff [00:28:06]:

Perfect. Thanks Saif. Appreciate it.

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Saif Hameed [00:28:07]:

Take care.

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Paul Goff [00:28:08]:

Bye.

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