A few hours away in Bac Giang Province, Crystal Martin — which has been supplying H&M for 20 years and operates across 28 production sites in four countries — has also invested heavily in decarbonization, with guidance from H&M’s energy engineers. Last year, the supplier won an H&M Award for outstanding achievement in energy efficiency. Among the most effective improvements were: applying smart controls to chiller systems, increasing fresh air intake during winter months to reduce the overall electricity consumption for chiller systems, insulating pressing machines, and changing to high-efficiency motors for ventilation systems.
Despite the clear signs of progress, there’s a long way to go. “There are challenges all around us,” says El Natour. “Not everything can be solved with available technologies.”
Finding favorable market conditions
Vietnam is the world’s third largest textile manufacturing market, after China and Bangladesh. While H&M doesn’t disclose production volumes by market, Karin Lind, H&M Group’s managing director of production, says Vietnam is one of its “most important” markets with 42 suppliers and 72 production units, indirectly totaling more than 60,000 workers. This is largely down to the country’s wide-reaching production capabilities, from seamless underwear, jersey, and footwear to heavy knits, denim, and accessories.
“Vietnam is a highly capable and very mature market, with skilled workers and government ambition to continue adding value to this ecosystem,” says regional country manager Jessica Vilhelmsson. “It also has untapped potential, specifically if we can localize fabric and component production, which would allow us to make later decisions on style and fabric, and be more precise in what we produce. It would also lower costs, because importing fabric means you don’t get the full duty-free benefits of the free trade agreement between the EU and Vietnam.”
Vilhelmsson has been leading H&M’s public affairs push in Vietnam. At the end of 2024, H&M signed a direct power purchasing agreement (DPPA) with the Power Engineering Consulting Joint Stock Company 2 (PECC2), hoping to secure renewable energy for its Vietnamese suppliers despite the limited availability on the national grid. It hopes Bangjie will be one of the first beneficiaries of this.
“We believe that these agreements will be the key to private actors generating renewable energy for our suppliers, from the national grid,” says Vilhelmsson. The company had a similar successful agreement with Türkiye in 2024. “It’s a prerequisite for electrification. We have to do these things in the right order.” It’s also a priority for Vietnam, which has a target to reach net-zero by 2050, ideally with 30-60% of its renewable energy coming from DPPAs. In 2025, just over half (52%) of the electricity in H&M’s Vietnamese supply chain came from renewable sources, says Vilhelmsson.
Incentivizing suppliers to invest in decarbonization
Around 18 months ago, I heard whispers that H&M was changing its approach to price negotiations, much to the chagrin of its suppliers. It turns out those rumblings were the early teething problems associated with a new costing framework, which H&M says is a key unlock in its decarbonization journey. Rather than negotiating style by style, H&M now negotiates 80% of its orders in bulk, committing to a set number of orders six months in advance, even if the specific designs and materials are decided nearer the time. The price is based on a formula developed by Lind’s team, which accounts for material and component costs and general expenses, while ringfencing worker wages, so negotiations don’t infringe on the suppliers’ ability to pay fair wages. In theory, this means the negotiated price can also include bigger picture costs that go beyond individual products, including decarbonization investments.