H&M Stocks Plummet After Slave Labor Allegation

H&M recently reported their worst fiscal year since 2000 following a series of allegations of Chinese slave labor in their factories. The charge is yet another serious claim against H&M, including cultural appropriation, the burning unsold products, and racial insensitivity. This past year had a 33% revenue drop from 2016, and data analysts expect even further losses in future quarters.

Celebrities like G-Eazy and The Weeknd ended exclusive design partnerships with the brand after a photo from the H&M catalog went viral of a black child modeling a green hoodie with the slogan “coolest monkey in the jungle.” H&M responded to the viral uproar by citing European humor and cultural differences. The company also hired a diversity leader and issued a public apology.

The H&M children’s’ sweatshirt that began an infamous viral image.

This was not the first racially-charged issue with H&M; in August 2013, H&M offered faux-feather headdresses for sale in their Canadian stores. The brand received several complaints that the accessories were culturally insensitive to Canada’s First Nations aboriginal peoples, as reported by The Guardian. Later in November 2015, the H&M South Africa branch was accused of racism due to their lack of black models featured in their advertisements. H&M only added fuel to the fire by defending their all-white campaign as a “positive image,” insinuating that Caucasian models were the preferred look for their brand.

H&M in October 2017 was investigated for burning tons of unsold clothing, creating an environmental issue. The brand denied the claims, even after an investigation proved the claim.

H&M was charged with burning over 30,000 pants this past fall.

The recent allegations of H&M claim that the brand uses inmates of a Chinese prison to produce packaging supplies and textiles. The report, conducted by The Financial Times, also states that European retail chain C&A and makers of Scotch tape and Post-Its technology firm 3M are complicit in the charge.

Peter Humphrey, a British corporate investigator, and former journalist spent 23 months in jail in China for allegedly obtaining private records of Chinese citizens and selling the information to clients like pharmaceutical line GlaxoSmithKline Plc. Humphrey denied the charges. However, during his prison stint, Humphrey claims himself and fellow inmates made packaging parts for large corporate brands.

An H&M spokesperson said the company was looking into the allegations but could not comment on whether they were true. “It is completely unacceptable placing manufacturing into prisons and it seriously violates the regulatory framework that our suppliers must follow,” the H&M spokesperson stated.

However, this is not the first negative factory claim against H&M. Human rights group Asia Floor Wage Alliance released a report in 2016 that documented sexual harassment and low wages in H&M factories.  “At this point, we do not see H&M working in a way that would prevent another Rana Plaza,” a coordinator of the Alliance told the New York Times. The statement was in reference to the 2013 Rana Plaza sweatshop factory in Bangladesh that collapsed due to unsafe infrastructure, resulting in 1,100 deaths of workers. Furthermore, a research report from the Center for Alliance of Labor and Human Rights found that an average of two to four workers faint every month at H&M factories in Cambodia.

As for their dip in stocks, H&M’s chief executive officer Karl-Johan Persson maintains that the brand will recover. “We feel confident about the new business portfolio,” Persson said. “I believe in a gradual improvement over the year, the first quarter will be weak and then a gradual improvement. We have many improvements in process that have the ability to counteract the shift in the industry.”

Unfortunately, H&M’s problems are not just in profit losses. The company will have to radically change their approach to the public in both respect and appreciation of the vast types of customers the chain attracts. And even then, their humanitarian and environmental issues might just be too much for the brand to change. H&M might not be retailing for much longer.

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