H&M will introduce a "fair wage method" in 20 garment factories in Bangladesh this year to help improve productivity and factory conditions and combat unrest in the plants that make apparel for the Swedish retail giant.
The move by Europe's second-largest clothing retailer comes as part of a programme for three of its Asian suppliers -- Bangladesh, China and Cambodia.
H&M, which has 3,649 stores across 59 markets, is introducing the system to a total of 68 factories in China, Cambodia and Bangladesh this year, a plan that seeks to boost workers' pay, provide some discretionary income, and allow representation through trade unions, according to a Bloomberg report.
The retailer buys about 80 percent of its products from Asia.
The method will ensure higher prices for the garment items the retailer buys from the factories -- a measure that will raise wages for workers, one of H&M's Bangladesh suppliers told The Daily Star, asking not to be named.
Bangladesh increased the monthly minimum wage for the garment workers to Tk 5,300 in November 2013 from Tk 3,000 before.
H&M has a plan to introduce the method for all of its sourcing factories by the end of 2018, which will focus on a well-functioning dialogue between employers and employees for settling disputes, according to a statement from the company.
“The implementation of the method will contribute to sustainable pay structures, more regular wage adjustments and enhanced communication and social dialogue between the management and workers' representatives,” the statement said.
Currently, H&M is the largest buyer of Bangladeshi garments, purchasing nearly $5 billion worth of products a year.
The company has been under pressure along with other retailers to improve factory conditions following the Rana Plaza building collapse in Bangladesh that killed at least 1,127 people, and a nationwide strike by garment workers in Cambodia last year that left three dead.
The company in the statement also said it tested the method in some factories and found good results. “The initial test results are very promising and H&M looks forward to continue the work,” the statement said.
H&M said an initiative to train workers for skills development in Bangladesh taken in 2013, in collaboration with the International Labour Organisation and Swedish International Development Agency, is showing promising results.
The progress for H&M's Social Dialogue Programme in Bangladesh continues, the statement said.
The aim of social dialogues is that the workforce has democratically elected and effective worker participatory committees that can lead to the establishment of trade unions able to negotiate in areas such as wages.
The goal is that 100 percent of all factories in Bangladesh which produce for H&M will be covered by the programme.
“A lot of the riots and unrest we have seen in countries like Cambodia and Bangladesh are connected to the issue of wages,” Bloomberg quoted Anna Gedda, H&M's head of sustainability, as saying.
“If we can address the issue of wages and industrial relations, it will lead to more stable production markets,” Gedda said.
H&M tested the method in three factories across Cambodia and Bangladesh in 2014. Absenteeism fell in the Cambodia factory, while the retention rate increased, Gedda said.
It remains to be seen whether higher wages will affect the company's purchasing prices and profit margins, she said.
The clothes H&M gets from Asia are often priced in dollars. In June, the company reported second-quarter profitability at its lowest level in nine years after a strong dollar led to higher garment costs, according to Bloomberg.
“It's not just about productivity and prices,” Gedda said. “It's about creating an environment that is sustainable and can promote a textile industry.”