Future-proof and fashion forward: how Daniel Ervér is evolving H&M Group

0:11Hello and welcome to The Entrepreneurs on Monocle Radio, the show all about inspiring people, innovative companies and fresh ideas in global business. This week we're off to Stockholm to sit down with the leader of one of the world's most recognisable names in fashion retail H &M Group. We'll hear how he and his teams are working to ensure their various brands' relevance for new generations of customers. And how, alongside that evolution, he's ensuring that the group adheres to the foundational values of sustainability and long-term responsibility that have defined its story so far. We want to be fast-fashioned in the sense of being quick and adapting to trends, quick of changing, so that we are relevant and we are moving with change of times.

0:55But we design for longevity. We don't design full garments to be worn once or twice. That is Daniel Aver, the CEO of H &M Group. And this is The Entrepreneurs with me, Tom Edwards.

1:17You're listening to The Entrepreneurs. Daniel Aver leads The H &M Group, the global fashion and design company with more than 4 ,000 stores in over 80 markets and with a portfolio alongside its eponymous flagship of brands like Koss, Weekday, Arquette and other stories and more. Auvergne has been with the business for more than 20 years, has overseen the H &M brand since 2020 and will mark three years as CEO of the group in January. At a fascinating time for the business's evolution and with H &M returning this very week to London Fashion Week, we thought it would be the perfect time to head up to visit H &M at its home base in Stockholm to hear from voices across the business and, of course, from Daniel himself about how he's navigating the current fashion retail landscape, the value of long-term brand building, and what he and we should be expecting next.

2:09Well, it's a pleasure to welcome Jack Simpson to the studio for the Entrepreneurs. Thanks for joining me on the programme. This is a first. It is a first. It's unprecedented. Very exciting. And speaking of excitement, you've been on your travels. We shipped you off with your little case up to Stockholm. Tell me, what was on your agenda? Well, I went to go meet Daniel. That's Daniel Erva to you. He's the H &M Group CEO. You know, well, he's managing about 20 billion euros across H &M and Coz, Weekday, Arquette and the like. And we went to go speak to him just and learn a little bit more about what H &M are doing in terms of rebranding and sustainability.

2:46And it was an interesting day out. So up in Stockholm, you went to the headquarters. And it's interesting, you obviously spent some time with Daniel, but you met a few of his colleagues as well. And it's interesting, this sustainability angle, it's really baked into the H &M sort of raison d 'etre. We know that it comes from the sort of founding, owning family still. The sort of winds have changed direction a little bit, haven't they, in big retail. It must be interesting how he wrestles with that. Because whilst they talk a good game and deliver, indeed, on sustainability, obviously they're under a lot of pressure.

3:14and they're doing a high volume, massive scale enterprise. It must have been fascinating to hear from him and the team actually about that. So, you know, H &M is a fast fashion brand. So we automatically assume a lot of different things. But I think what I learned when I was there is that the sustainability argument at H &M is sort of split up into three different categories. So you've got the sort of carbon emissions, which they have cut already by some 50 % and they're going to cut by 90 % by 2040. And they seem to be on track with that. They've also got the waist, which is a big problem, of course, with H &M.

3:47And I did ask Daniel about this, but, you know, back in 2019, they had about$4 trillion worth of wasted clothing that went straight to landfill. And that's something they're really trying to change just by sort of picking up, you know, with the designers. And they've also got these sort of future fashion watchers who are designing collections three, four, five seasons in advance. so they're really trying to nail the numbers so that much four trillion dollars worth isn't going to waste anymore but i also thought what thought was really interesting is you know i met several of the staff in stockholm there's 500 designers there but the biggest part of h &m is actually out in bangladesh and vietnam where all these clothes are being produced and there's some 800 000 workers working for h &m out there which is 99 of the company so a lot of the sustainability comes down to this sort of social sustainability, they call it, where they're working with governments, they're lobbying and finding different ways to make things a little bit more sustainable.

4:45Jack, fascinating stuff. Well, let's dive into it and hear what Daniel ever had to say to Jack when he went to visit him up in Stockholm. H &M has been about making the inaccessible accessible, and that is giving the customer access to a value you otherwise wouldn't get. And that's a combination of the price, but equally so the design, the quality and sustainability ambitions the promise we give to our customers regardless the price point for that price point you will get an unbeatable value for money that means sometimes we sell a leather jacket for 200 pounds but for that price point it's an outstanding quality to get access to and then we have a family where your kids are going back to school and you need to find your you know pull off of the kids to go to school and we want to offer that at five pounds because we believe everyone has the right and should have the opportunity to dress well.

5:29So that's our firm belief and that's sort of the core promise of H &M that we create this accessibility across the different price points. But that doesn't always need to be low price points, but it is about what's the value, the unique unbeatable value we offer. I have the privilege of being in a company that it's a public company, it's on the Stockholm Stock Exchange, but the majority owner is the Persian family and the founder family. And they are long-term owner with the majority stake in the company, which has allowed us to play a long-term game. And we started our proper sustainability and ambitious sustainability work 20 years ago.

6:02Unfortunately, it's taken longer than I think most of us thought for it to resonate with consumers. And it still is a very limited value to consumers. But it is, for us, a very important piece of our work. And there are three main areas. One is social sustainability. So the way the 800 ,000 people, in what way are we responsible? partner, employer, buyer to our supply chain. And there's been a tremendous development over the last 20 years in sort of how we build unions and how we increase the rights of... This is usually in places like Bangladesh, in Vietnam. China also, Bangladesh, Vietnam. But we do sourcing also in North Africa, in Turkey, yes.

6:44But the way we show up as a buyer and the way we take responsibility for building good, fair, equal jobs is where we can contribute in a positive way. The other space is carbon emissions and CO2. And there we worked intensely over the last years. And we have a commitment to reduce our CO2 emissions with 53 % compared to 2019. And that is a lot through the energy mix and how we build long-term partnership with our suppliers and help them to transform into renewable energies. Well, you've set some pretty staggering targets for it. It's 57 % by 2030. 90 % by 2040. that you want to reduce emissions by.

7:21And so far, we are minus 34%. Exactly. So you're ahead of target. I would say we are more or less on target, but it's a very ambitious target. So the positive thing is we start to see now that growth is decoupled from CO2 emissions, which is the thing that needs to happen for it to be a realistic target over time. And then the last question, which is the most difficult question, and we have not as an industry come at all where we need to come, is the waste topic. The overproduction. Overproduction or waste. And I think overproduction happens. There's very little overproduction in H &M. The garments are sold either at full price or at a reduced price.

8:01But for us, the big challenge is what happens when a consumer no longer wants to use the garments. It's the responsibility of care after it's left. Exactly. So the end-of-life experience to the product. That is the industry's, I would argue, still largest challenge because there are the fewest solutions in place in how to tackle that challenge. I totally agree. And I think this is where I find the comparison between an 80-pound t-shirt and a 10-pound t-shirt quite interesting is because the lifespan of that 80-pound t-shirt will obviously be longer, meaning you know where it is and you know where it's being used.

8:35But it's harder maybe with a cheaper product to be able to predict where it's going. So for example, in 2018, obviously long before you took over as CEO, there was I think four billion dollars worth of unsold product at H &M that's gone down substantially in recent years how do you tackle that how do you sort of put the brakes on almost because you must be producing almost as much it's just your design teams are probably working harder I assume to make things that people want how have you gone about changing that issue of overproduction and sort of specializing the design so it is picked up off the rail first of all everything the vast vast majority of what you define as an overstock is still being sold but it's being sold at the discounted price yes and of course we want to our business ideas that we sell it at full price so the better we become in understanding the demand forecasting demand optimizing it across our 4 000 stores that the right product goes to the right store the lower the stock that we need to carry and that reduces the overstock.

9:42But it's really important. It's not garments that we never sell. It means that we put less garments on reductions and less garments that goes to sale. But that is not solving the waste because the waste challenge sits with the garments and the end-of-life span. So what happens once you're worn the garment? Then I would argue that it's not always a question of price. So our garments, we want to be fast fashion in the sense of being quick in adapting to trends, quick of changing so that we are relevant and we are moving with change of times. but we design for longevity. We don't design for garments to be worn once or twice.

10:14That's not our business idea. I have three daughters, and my youngest daughter is six, and my oldest is 15. And the six-year-old is wearing a lot of clothes that my 15-year-old wore, and that's the idea of H &M. And then we are working on finding, and we need to work harder, but also the industry need to work harder, and find what are good ways that once a garment no longer should be worn, and you don't want to wear it anymore, what do you do with it? And we have, and you met the team that is working with our venture portfolio. So, you know, we have one venture which is called Selpy, which is a secondhand platform.

10:45And secondhand is becoming much more of a normal way of shopping and consuming, which is great because then garments are good quality, but you no longer want to wear it. We have a solution where you can order a bag. You put the things you don't want in the bag and Selpy sells it for you and you split the profit, which is a great way to monetize your wardrobe while you give the garments a chance for a second life. And then if not, if you cannot sell it, you bring it to an H &M store and we collect it. And then we're working with Looper, which is a joint venture with a German waste management company where we build sorting plants.

11:17Because to be able to give garments that cannot be sold in a second life, you need to sort it with good quality so you can use it for upcycling new material innovations or take care of it in a responsible way. And that's the other venture we're building to start to build this ecosystem of a second life. But it's still early days. These are companies that are growing and that show promise, but it's still, for the industry, I would argue this is the biggest challenge left to be tackled. Certainly. And it's encouraging to hear you working with these third parties. I know schemes in the past haven't worked as well.

11:51You know, you have the recycling bins in shops that the product would be taken in by the customer, taken back, put in these recycling bins, and you weren't sure where they were going. And they ended up in landfill around the world, whether that was in Chile or Ghana. So it seems like after noticing that, you guys have pivoted to working with these third-party specialists, as you say, Looper and Circulus and Silpy. Do you think that's the answer? Do you think that's the long-term goal, is to be working with these third parties? Or do you think H &M can actually eventually do this part of the user experience, if you will, but the lifespan of the product on their own?

12:29So Silpy is the majority on company by H &M. So Selpi is part of the H &M group. It's not the third party. The owners still have a small stake, which we believe is important for the know-how and running the bit, but it is an H &M group company. Looper is a joint venture, meaning we own half of the company. But in these areas, I believe partnership is the way to innovate. So you could say it's argued that it's part of the H &M group, but we have done partnerships to make sure that we start to drive the innovation because we need the expertise in this area to come from people who are, manage the plastic industry and the recycling of the plastic.

13:05And that experience needs to come into textile. That's why we do partnership, but it's still a part of the H &M group. In essence, it is an extension of how our consumer ecosystem looks like, and we are building into it. But with that said, it's innovation, it's early days, and we need to continue to put effort and emphasis and belief to the fact that the industry also needs to change. Yeah. You touched on textiles there and innovation. And what I've been struck by today, which I didn't expect, You know, I've, even in Stockholm, I've spoken previously with places like A Day's March or Clattermussen or Our Legacy, for example.

13:41And technological innovations in fabrics is something, you know, these guys work with all the time. And I didn't expect to see that here at H &M to such a degree. So I sat down with Martin earlier, who's your expert there. And, you know, he introduced me to a new cotton that you developed. that requires no arable land, right? And obviously, you're working with startups and you're investing in startups doing amazing things. If H &M are inventing almost cottons that don't need land to grow, that's an amazing thing. So how much emphasis are you going to put on sort of fabric innovation going forward?

14:21We will continue to put a lot of emphasis because to truly transform the industry, the fabric transformation is one of the key pillars. we need to find and it's part of the waste solution also to develop innovative fabrics that can be you know close the loop fabrics where we can use the waste and we make it up cycle it into becoming new fabric is an important could be an important piece of the solutions to the waste issue so for the industry to be able to become circular and to be able to have less impact on the planet we need a lot more innovation when it comes to fabric and the development of fabrics and And coming back to what I said, the advantage of having a long-term committed owner allows us to play the long game because this is not short-term.

15:02Over time, I'm convinced, I'm deeply convinced that this would be a competitive advantage for us and it would be crucial for the transformation of the industry where we play an important role. So we will continue to push the innovation and the world is turning from, you know, at certain points, more focus on sustainability, at certain points, less focus on sustainability for us. It's a firm belief that this transformation needs to happen. And so we will stick to our targets and the ambition and continue to support innovators and entrepreneurs that really want to challenge the way things are being done.

15:31Jack Simpson is still with me. Amazing stuff. We're going to hear more from Daniel in a moment, Jack. But you mentioned at the top of the show, you obviously had a bit of a wonder, you know, a bit of a nose around. You met lots of the team. And this was fascinating. As soon as you mentioned this to me, I said, I want to hear more. We know they've got this huge army of designers, but they have specialists who are looking at things as detailed as how black is the black in H &M black garments? A thing maybe you wouldn't think of, but super, super interesting. And you've got to, well, you've got to find out.

15:58Yeah, I met this sort of, I think his title was some sort of colour guru, Raffan. And he was an incredibly passionate guy. And he was particularly passionate about the colour black. And he genuinely believes that H &M have nailed black. There were so many guys there that we met. There was also a guy that had designed a cotton, Tom, that you don't need land to grow. Dare I ask you how to explain? Can you explain how? Can I explain the science behind it? Probably not. No, Tom. But what I will tell you is it's like a lab-grown cotton. It's not synthetic, supposedly. So these guys are coming up with some pretty savvy ways, I would say, to design new clothes and be more sustainable.

16:37Let's take a listen. I've been looking at black collars for almost 30 years. among different brands. My God. Gucci, Prada, you name them. But our black is actually, I mean it, it's the best black. It's the darkest, it's most neutral. How do you prove that? How do you go about proving how perfect your pigment is? I can compare it and I can also measure it with a spectrophotometer and I can see if it's a little bit bluish or reddish or greenish. This one is completely neutral. Ah, scientifically. Yeah. It must be achievable by production, and that's the difficulty also, because you can produce a really nice black, but no one can produce it.

17:24Yeah. So that's a masterpiece.

17:28Daniel Ervér:Another thing is that, I mean, different colors look different in different fabrics, but you also learn like silk is a fabric that can take any color, but that you learn as well. So it's really scientific. It's good that you have your labrera. It is. I mean, it's both feelings and a little bit science. And it becomes science when you want to produce it. You need the right dye stuffs. You need to achieve the same look. You have to mix the dyes correctly. Everything needs to be perfect.

18:08You're listening to The Entrepreneurs on Monocle Radio. We're going to hear more from H &M CEO Daniel Everett in just a moment. Jack Simpson is still with me. And Jack, it's been fascinating to hear about your adventures, about how Daniel's stewarding this huge brand with all of its global operations. And actually, speaking of brand, rebrand, there is this broader kind of refresh. And actually, one thinks of H &M, one thinks of retail. But they are interrogating how events, returning to fashion weeks like London right here in the UK capital, putting on shows, gigs, changing the online presence, all of these other facets shape the brand and the perception of it.

18:46I guess when you're at the big desk like Daniel, that's one of the things you wrestle with. But it must have been interesting to hear from him about how he's going about doing that. Yeah. And, you know, he's, as I say, he's the CEO of the H &M group. So he's got to think about all these different brands within this as well. It's not just H &M. it's Coz and Arquette and how each sort of announced themselves on the market. And what was interesting was, you know, this is a place that has 4 ,000 retail stores in the world. But he's really focused on trying to connect with people beyond that as well.

19:18So we've got gigs. So I think, I mean, I actually went to one myself, an H &M gig two years ago with a Charlie XCX at the Copper Box Arena. And it was a lot of fun. But they've invested in ones in Sao Paulo with Anita and Gilberto Gill. So there's big ticket items that these guys are getting involved in. And I think it's also worth thinking about the fact that these guys have been around for 80 years. This isn't the first reinvention. So Daniel was quite keen to sort of say that this is just one change in a really long history, actually. Let's hear a bit more from Daniel right now. The fashion industry has been changing dramatically over the last 80 years.

19:57And the reason why we still exist and the reason why we're still around is that we have changed with the industry and all the changes that have hit the industry. And to stay competitive, we need to change. And we have found that the core proposition of making what's inaccessible for the many accessible by giving everyone the chance to explore their style, their way of expressing themselves and making that about affordability, not the size of a wallet. Doing that and staying relevant means that we need to change the way we are being perceived. So we worked a lot on how do we, of course, most important priority is the product.

20:29The product is what stays in the mind of the customer. It's why customers come back to us. If they speak well about us, if they don't speak well about it, it all comes down to the product. But then the way we show, inspire, elevate the product is a massive undertaking. And we have made big changes in how we present the product and make it come to life and inspire the customer. That is much quicker to do in the digital space. If you visit H &M.com today, it's much more the representation of the brand we want to be and the expression and where we show the elevation and the inspiration, curation and guidance.

21:00And we are working. Then we have a fleet of 4 ,000 physical stores, which we're gradually changing. But that requires, they are tremendously important, but it takes time to change. And you are seeing sort of the front end of that change in the direction we're going in was what you saw today. And that's the intention of how we'll continue to transform our store portfolio. and it seems like you know you're having to almost fight on on several fronts there but you you touch on these sort of like real life experiences and you started here two and a half years ago as ceo and i think it was two and a half years ago that i was in london's east end at the copper box watching a charlie xcx gig courtesy of h &m that was an amazing amazing gig and it really felt like a bit of a shift and a bit of departure from how people in london were thinking and perceiving of H &M.

21:48And we got to the arena and there's queues going around the blocks. Everyone was so excited. Even Charlie X seemed quite excited. And I've been to plenty of corporate gigs where they forced them to play two songs and they roll them out and they roll them back off. It was a whole evening. It was amazing. So it seems that it's hard to fight on the high street. You've got 4 ,000 stores, many of which I assume you'd want to refresh, but as you say, this takes time. So it seems like you're investing more and more in the digital packages, but then also these in real life experiences that maybe H &M hasn't done as much in the past.

22:29I know you've done fashion shows and stuff like that, but you debuted again for London Fashion Week last year. How do you perceive the value of these sort of in the flesh moments, whether that's with journalists around at a fashion show or whether it's fans and gigs and experiences what's the value there they hold a very important value to us in many different ways and shapes and forms and we are learning i think the charlie xx is a great example where we said coming back to the purpose of this company to liberate fashion for the many and re-establishing h &m is this where we invite everyone to explore their style fashion should be something joyful It should not be dictating.

23:12It should be a way that you explore your self-expression, which is very much in line with music and popular culture. And we saw a need to take H &M back to that H &M energy that you could feel when you entered the Charlie XX show. That's so much of what our brand energy is. Music plays a really important part in being in partnership with fashion. So also when we did the London Fashion Show last year, that was about how can we put the High Street collection, a very affordable collection, in front of the eyes of the world's most critical fashion journalist and how can we create a show that is not pretentious but that gives this H &M energy.

23:46So we had Lola Young, we had Twitch characters walking the show to create a different atmosphere and feeling but still with the elevated fashion so that we could show fashion can be credible, cutting edge but still affordable and exciting with a positive energy. And we entered Brazil for the first time for the H &M run which was a huge step last autumn. And we did a similar, now we did a concert and we invited 3 ,000 future customers in Sao Paulo. And we had both Anita, who's sort of the new up and coming, and then we have Gilberto Gil, and they performed together on stage. So that is a way to express who we are and the energy of the brand, which is very difficult to do in another way than a physical experience.

24:28So from that angle, it is important. But then end of the day, when the customer comes into our physical store, when they enter online, we need to make sure that we also keep the promise alive and their product is tremendously important that the offering matches what you expect but also the elevation and inspiration as i said we can't further digitally but we have a lot of work still to do on the physical space as we said london fashion week starts in september you're gonna be there what's the importance of being there i know for h &m group you know cos for example their first flagship was in london what's the importance for H &M to show themselves at that event?