H&M Boss 'We Are Helping People Live a Better Life'

Karl-Johan Persson, CEO of global clothing chain H&M, discusses the responsibility of the garment industry for working conditions in Bangladesh and the so-called contradiction between growth and sustainability.

SPIEGEL: H&M describes itself as a responsible company. Have you reconsidered your responsibility following the catastrophe in Bangladesh? More than 1,100 people died when the Rana Plaza complex, with its five textile factories, collapsed in Dhaka.

Persson: No. H&M did not produce anything at Rana Plaza. We have been trying to improve conditions in the textile industry for years. The horrific catastrophe in Bangladesh led to us to become the first company to sign a fire protection treaty (which calls for independent, rigorous safety inspections and calls for companies to stop doing business with any factory that fails to make needed safety improvements, among other things) which many others have since subscribed to.

SPIEGEL: You could have done that much earlier on. Around 700 people have died by fire alone in Bangladesh's textile factories since 2006. Why did H&M only sign the treaty now?

Persson: This is the first treaty of its kind regarding fire and building safety. A step like that only makes sense if many or ideally all companies take it together. That was not the case before. But we were already doing a lot prior to this. We've trained more than 500,000 textile workers in fire and safety procedures, that being part of our Code of Conduct. We have also conducted programs in skill development and social dialogue, and we have published the names of our 800 supplier firms, creating transparency for the first time. The problem is of a different nature. In Bangladesh we are dealing with a corrupt system. The factory that collapsed was approved for fewer stories than it actually had. The catastrophe has brought everyone closer together now -- the government and the companies there.

SPIEGEL: You have your supplier companies checked regularly by your own inspectors -- at the company Garib and Garib in Bangladesh in 2009, for example. There, fire extinguishers and first aid boxes were not accessible, and yet H&M continued producing there. A year later there was a fire there which killed 21 people...

Persson: ...that was a disaster. We checked (the building) once and urged them to make improvements. We do not cut off (relationships with) suppliers unless they attract attention at a second inspection. Perhaps in this case we ought to have performed more inspections. But should we have left this factory? No, I don't think so. That would not have helped anybody. During the months after the tragic accident, our staff visited the factory more often. As there was a willingness to improve the conditions at the factory, we preferred to remain a buyer and support our supplier.

SPIEGEL: There were devastating photos of people killed in the Rana Plaza building. How do those photos make you feel?

Persson: People died; that is a terrible thing. It is difficult for me to answer that appropriately. But it upsets me just as it does you.

SPIEGEL: What will the fire protection treaty cost you?

Persson: Five hundred thousand dollars each year. It is set to run for five years, which means a total of $2.5 million.

SPIEGEL: Five hundred thousand dollars doesn't even represent 0.0025 percent of your annual turnover. Is responsibility not worth more to you than that?

Persson: That is just one of many activities. Among other things, we are the biggest buyer of organic cotton. We employ more than a hundred people solely in the field of sustainability. We are extremely restrictive about the use of chemicals in clothing. We were the first fashion company ever to collect used clothing and recycle it. And we are aiming for carbon-neutral production by 2015.

SPIEGEL: That sounds ambitious.

Persson: It is. That's why it annoys me when H&M is portrayed as an irresponsible cheap supplier. We organize programs to promote dialogue between employer and employees. We educate textile workers about their rights and about minimum wages. By being present and by using our influence to promote good practice, we can help to constitute real change. Through our active presence we can contribute to a positive development. There are few other firms who think and invest in sustainability in the long term the way we do.

SPIEGEL: With the fire protection treaty, all you are actually doing is carrying out something that ought to be a matter of course: safe workplaces for garment factory workers. The other problems remain: forced labor, overtime, low wages. When were you last in Bangladesh?

Persson: Last September. I met with Prime Minister Sheikh Hasina and asked not only that the minimum wages be raised, but that they be reassessed annually. It was not the first time we have asked for that: We wrote a letter to the government back in 2006 demanding higher minimum wages, and we repeated that demand in 2010. In 2010 the minimum wage was doubled.

SPIEGEL: The minimum wage is equivalent to around €30 ($38) a month. Do you know how many hours of overtime a seamstress has to put in to earn a wage with which she can feed a four-person family?

Persson: There is more than one definition of the wage you need to live on.

SPIEGEL: The organization Asia Floor Wage says that an adequate subsistence wage is around €120 a month. An unqualified seamstress would need to work 100 hours of overtime each month to earn that wage.

Persson:The Asia Floor Wage definition is controversial. We go with the Fair Wage Network standard. They examined 200 H&M suppliers and their income structures and overtime regulations. It is difficult to determine what exactly a minimum subsistence wage is.

SPIEGEL: But your seamstresses are paid according to daily stipulated production targets -- that is, piece work. Why is it so difficult to raise the minimum wage or introduce a fixed monthly wage?

Persson: Firstly, H&M does not own any factories and, hence, does not pay the wages. If that were to happen, H&M might remain in Bangladesh, but thousands of other buyers would leave the country and buy elsewhere. It would be a disaster for Bangladesh. There are 3.5 million textile workers there, 80 percent of whom are women. Twenty billion dollars of turnover is generated in 4,500 textile factories, and 80 percent of exports are textiles. The country needs the textile industry.

SPIEGEL: Do you seriously believe that other companies would change their places of production simply on account of such a small rise in costs?

Persson: It is not as simple as it perhaps sounds. In the textile industry, salaried workers already earn better wages than those in agriculture, while teachers and doctors receive little more. If wages were to be raised significantly, the entire income structure would be thrown into confusion. At the same time, development workers often ask me to move production to Africa because the people there so desperately need jobs. If I were to do that, yes, it would reduce poverty there, but I bet that poverty would promptly return to Bangladesh.

SPIEGEL: Why don't you simply demand that your suppliers pay higher wages if people cannot agree on a higher official national minimum wage? You are, after all, the biggest buyer in Bangladesh. You have the power.

Persson: I would pay an H&M premium immediately. If a sustainable wage system were made and applied in the Bangladeshi textile industry, I would do it. But in practice, the situation is as follows: In any given factory, the people do perhaps 10 percent of their work for us and the remaining 90 percent for other companies. It would create problems if only we pay more for our part of the goods in order to facilitate higher wages. We also have another problem to solve: Customers think that a shirt sold for €9.90 must necessarily be produced under much worse conditions than one sold for €49.90. And yet they both originate from the same factory.

SPIEGEL: The Clean Clothes Campaign has calculated that a t-shirt would cost a mere 12 cents more if the minimum wage in Bangladesh were to be doubled, since wage costs make up only between one and 3 percent of the retail price. If the additional costs are so marginal, why don't you establish better wages?

Persson: I'll say it again: H&M does not own any factories and hence does not pay the wages. What is needed is a complete solution. It is no use if we alone pay better. All the buyers must act together. If we were to take up all of a supplier's capacity then perhaps it might work, but in reality things are not like that. So far we only have four factories that work exclusively for us, and there we have been trying things out. A fifth factory is currently being built where higher wages are already paid, and only organic cotton is being used.

SPIEGEL: Are customers indifferent to the origin of their clothing?

Persson: I would be happiest if I could pin our Sustainability Report to every single garment, since the more the customer knows, the greater the pressure on companies that don't deliver on their responsibility. In this respect the public pressure to which we are subject through the media, social networks and campaigns is good. It forces us to do more. I admit that 20 years ago neither we nor other companies really took any notice of the subject of sustainability because there was no pressure. But the progress has been enormous since then -- at least it has been with us.

SPIEGEL: Did you never consider building up your own factories?

Persson: No, that would be a completely different business model. Our business is design and retail, something we have years of experience in. We intend to focus on that. The majority of retailers do not have their own factories. Yet that does not have to be a drawback. We still manage to give millions of people jobs who 20 years ago were living in poverty. That's a wonderful thing. We are helping people live a better life.

SPIEGEL: Now you sound like a charity organization with no economic interests whatsoever.

Persson: No, you're misunderstanding me. We are a profit-oriented and competitive company. There are four reasons why we are in Bangladesh and China: low costs, good quality, sustainability and nearness to the market. But to me, producing cost-effectively and creating prosperity in our producing countries is not a contradiction.


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