Case Learning Outcomes Students should apply their learning in ethics and global operations/supply chain management to discuss the tension between H&M and China, and to strategize the retailers next step. Source: Photo by Kevin Frayer/Getty Images The Issue Last summer, H&M was one of several retailers who announced they would no longer use cotton from the Xinjiang region in China, citing concerns and increasing consumer pressure about human rights abuses in global supply chains. Roughly one-fifth of the worlds cotton is produced in Xinjiang, but news reports suggest that the material from the region is made in forced labor camps where ethnic minorities are being unlawfully detained. SAGE Madeline Rae 2021 SAGE Business Cases Page 3 of 4 Building Ethical Supply Chains: The Case of H&M in China 1. 2. 3. Since at least 2016, Uyghurs, a Muslim Turkic minority with just over 12 million people in Xinjiang, have been retrained via imposed labor programs and forced into detention camps. The Chinese government says the camps are for job training to support economic development, but evidence suggests otherwise. In January 2021, the Trump administration banned all imports of cotton from the Xinjiang region, including products made from the material, accounting for an estimated 1.5 billion garments imported annually by American brands and retailers. On March 22, Britain, Canada, the European Union , and the United States all announced sanctions on Chinese officials over the treatment of Uyghurs in Xinjiang, causing China to retaliate by calling for a boycott against the brands that had spoken out against Xinjiang nearly a year earlier. It is not immediately clear why H&M has received the brunt of the backlash, but just hours after the sanctions were announced, H&M had been canceled in China, with calls to boycott Nike and Burberry soon following. H&M products were pulled from Alibaba Groups Tmall and JD.com, Chinas most popular e-commerce platforms; buildings and malls housing physical stores removed H&M signage; app stores removed the H&M app; and high-tech airbrushing techniques erased the storefronts from ride-hailing app Didi Chuxing and map services operated by Alibaba and Baidu. By the end of March, H&M had completely disappeared from the Internet in China. Why Is It News? Online Chinese retailers bumped H&M from their inventory, a major issue for the fast-fashion company since more than a fifth of shopping in China is done online. Chinas large scale makes it arguably the most important sales hub in the fashion industry. The Communist Party of China often pressures foreign brands to adopt its positions on sensitive issues or in retaliation over actions by these brands home governments. Most businesses comply with Chinas demands because the country is one of the biggest, fastest-growing markets, particularly for global fashion. Several singers, actors, and influencers in China broke ties with shoe and clothing companies who refuse to buy Xinjiang cotton. Influencers in China wield even more power over consumer behavior than they do in Western countries and are often needed to legitimize brands and drive sales in China. Several other Western brands, on both the luxury and fast-fashion ends of the spectrum, are struggling to respond to the mounting pressure to condemn the human rights abuses in Xinjiang without triggering retaliation from the Chinese government and losing access to one of the worlds biggest and fastest-growing markets. Conversely, other brands like Anta Sports, FILA China and Muji have either switched to Xinjiang cotton or are prominently advertising their use of it. According to a report from Bain & Company, China is expected to be the worlds largest luxury market by 2025, and is the only part of the world to report year-on-year growth (reaching USD 52.2 billion last year), making it a market that is forcing many brands to reconcile their bottom line with ethical supply chains. Discussion Questions What does it mean for companies to have an ethical supply chain? Why is an ethical supply chain problematic for H&M in this instance? What should H&M (and other brands facing this same backlash) do next?