Beijing will force companies that want both greater access to the country and meet ESG criteria to be chosen
The fashion industry is firmly trapped in Chinese handcuffs. Swedish retailer H&M has come under a sudden attack over an old statement claiming not to source materials from the Xinjiang region, accused by Western activists and politicians of abusing Muslim minorities. European companies that want both greater access to the giant Asian country and credibility on environmental, social and governance (ESG) issues will be forced by Beijing to choose between the two.
On Wednesday, the Communist Youth League of China published a text on a microblog in which it pointed to H&M for comments last year in which it claimed to be “deeply concerned” by the news of forced labor in Xinjiang, a major producing region. of cotton.
The € 30 billion company is in a tough spot in a market where it has more than 500 stores and generated 11 billion kronor (€ 1.1 billion) in revenue last year.
The reaction has been fierce. H&M appears to have been censored by major e-commerce portals such as Alibaba’s Taobao, and the company’s response that its supply chain principles “did not represent any political position” failed to appease it.
The social media hordes also turned on other Western companies, such as Gap and Nike. In the absence of a public backtracking, it is unclear how the business impact can be contained.
Beijing has remained firm in its policy on Xinjiang, denying allegations of abuse and sanctioning a number of critical European legislators and institutions. This may derail the ratification of a recently signed EU-China investment pact. President Xi Jinping is betting that the contribution of Chinese consumers to the income accounts of foreign companies will trump Western moral squeamishness. Local rivals Li Ning and Anta Sports Products, among others, will benefit.
However, Xi’s tactic is risky. Many western fashion giants have made respect for human rights part of their brands. They have found it impossible to ignore what the United Nations has described as ethnic cleansing, much less endorse the Beijing line. The conservatism of the Chinese Communist Party in other areas, such as women’s and gay rights, also contradicts the values of the industry.
In addition, investor pressure on ESG is growing rapidly across the business spectrum. Garment companies have made money in China, the world’s largest clothing market (it reached nearly € 340 billion last year, according to Oliver Wyman estimates).