H&M’s ‘green’ financing tool supports supplier sustainability

The collaborative program aims to help manufacturers overcome the funding hurdles of implementing sustainable practices. Here’s how.

Kelly Stroh

An H&M-supported collaborative financing program is recruiting more brands to join after seeing initial success with an India-based supplier.

Last year retail giant H&M launched the Future Supplier Initiative in partnership with Singapore-based bank DBS to better help suppliers access “green” loans for infrastructure investments. For major fashion brands dedicated to decarbonizing their supply chains, helping suppliers overcome the hurdles of accessing funding is critical for reaching those sustainability goals.

The program is supported by organizations like the Apparel Impact Institute and The Fashion Pact, alongside participating brands like Gap Inc. and Mango, according to the program’s website. The Future Supplier Initiative also has supplier cohorts in Bangladesh and Vietnam, but it is looking to expand to other regions like China and Italy, according to a June 13 release.

Although the fashion industry is making efforts to lessen its carbon footprint, implementing more sustainable practices at factories, like electrification and renewables, can be financially difficult for suppliers.

This is where collaborative financing comes in.

Why collaborative financing?

An increasing number of governments have passed legislation requiring fashion companies to report emissions and set carbon-cutting goals.

H&M is looking to reduce its scope 3 emissions and promote more sustainable supply chain operations. Specifically, the company aims to reduce its scope 3 emissions by 56% and have 100% of its materials be recycled or sustainably sourced by 2030. The company reduced scope 3 emissions by 22% in 2023 compared to its 2019 baseline, according to its most recent annual sustainability report.

But H&M needs support from its suppliers to meet its emissions reporting and reduction goals.

Addressing greenhouse gas emissions through a collaborative financial approach is “strategic for H&M,” Sheng Lu, a professor and director of graduate studies at the University of Delaware’s Department of Fashion & Apparel Studies, told Supply Chain Dive in an email. Partnering with a bank like DBS helps assess and manage the loan risks, which enables H&M to make sure that the funding is used efficiently, he added.