H&M Economic Audit

1. Executive Summary

This forensic audit establishes the economic footprint of Hennes & Mauritz AB (H&M Group) within the State of Israel and the Occupied Palestinian Territories (OPT). The investigation was commissioned to determine the target’s “Economic Complicity” by mapping its leadership, ownership, and operational proximities to systems of occupation, settlement expansion, and militarization. The audit utilizes a multi-layered forensic approach, examining corporate filings, supply chain disclosures, investment portfolios, and retail footprints to assess the depth of H&M’s integration into the Israeli economy.

The analysis concludes that H&M Group’s engagement in the region transcends simple commercial trade (“Sustained Trade”) and constitutes “Strategic Complicity” through three primary vectors:

1. The Importer Nexus: H&M operates via a franchise agreement with Match Retail Ltd, a privately held vehicle of the Horesh Family. This establishes a high-proximity financial link to Union Motors, a parallel holding of the Horesh family that serves as a key contractor for the Israel Defense Forces (IDF) and Israel Police, supplying the chassis for armored operational vehicles.
2. Settlement Normalization: H&M maintains retail operations in illegal settlements (Ma’ale Adumim, Pisgat Ze’ev) and occupied East Jerusalem (Malha Mall). These operations provide material economic support to settlement municipalities and normalize the consumer experience within occupied territory.
3. Strategic Foreign Direct Investment (FDI): Through H&M Group Ventures, the target has actively capitalized the Israeli technology sector (e.g., Syte, Zeekit). This activity injects foreign equity into the “dual-use” technology ecosystem, where military-grade intelligence capabilities are adapted for civilian commerce, effectively whitewashing military R&D through fashion-tech valuation.

While no evidence was found of direct “Aggregator Nexus” contracts for fresh produce (e.g., Mehadrin) for H&M’s global operations, the “Settlement Laundering” risk remains critical within the textile supply chain, particularly regarding “Better Cotton” certification and the use of Dead Sea minerals.

2. The Importer Nexus: Match Retail Ltd and The Horesh Family

The foundational mechanism of H&M’s presence in Israel is not a direct subsidiary model but a franchise agreement. This structure, often used to limit liability, in this instance serves to obscure a direct financial conduit to one of Israel’s most significant industrial families with deep ties to the security establishment.

2.1 Corporate Structure and Ownership

In 2008, H&M entered into a franchise agreement with Match Retail Ltd, a company incorporated specifically for the purpose of managing the H&M brand in Israel.¹ This entity acts as the “Importer of Record,” effectively controlling the flow of H&M goods into the Israeli market.

Ownership Forensics:

Match Retail Ltd is privately owned by the Horesh Family, led by George Horesh and Andrew Horesh.1 The Horesh family’s business interests are consolidated under the Union Group (Union Motors). The audit identifies this ownership structure as a critical node of complicity. Unlike a passive shareholder, the Horesh family exerts operational control over the franchise, meaning that every shekel of profit generated by H&M Israel contributes to the aggregate capital of the Horesh conglomerate.1

2.2 The Militarization Link: Union Motors

The Horesh family’s primary asset is Union Motors, the exclusive distributor of Toyota and Lexus in Israel.¹ Forensic analysis of Israeli Ministry of Defense (IMOD) tenders and NGO reports reveals that Union Motors is a strategic supplier to the Israeli security apparatus.

Material Support to the IDF:

Union Motors supplies the Toyota Hilux and Land Cruiser platforms that form the basis of the IDF’s light armored fleet. Specifically, these chassis are retrofitted by defense contractors (such as MDT Armor) to create the “David” and “Ze’ev” armored vehicles.4

• Operational Use: The “David” vehicle is the standard patrol platform used by the IDF in the West Bank for raids, arrests, and patrol operations in Palestinian cities.
• Direct Complicity: By granting the H&M franchise to the Horesh family, H&M Group effectively cross-subsidizes a corporate entity that creates the hardware of occupation. The brand equity of H&M is leveraged to generate liquidity for a family business that equips the military.

2.3 Assessment of Importer Status

The Core Intelligence Requirement asks if the target utilizes a wholly-owned subsidiary. H&M does not. However, the “High Proximity” criteria is met—and exceeded—by the nature of the franchisee. A wholly-owned subsidiary would implicate H&M in paying taxes to the State of Israel. The franchise model with the Horesh family implicates H&M in a partnership with the military-industrial supply chain. This is a higher degree of ideological and material complicity than a standard importer relationship, as it strengthens a domestic oligarchic family pivotal to state security logistics.

3. Operational Footprint: Settlement Retail and Normalization

The forensic audit mapped the physical location of H&M stores against the Green Line (the 1949 Armistice Line) to determine territorial complicity. H&M stores in Israel are not confined to the internationally recognized borders of the state but extend into illegal settlements in the West Bank and East Jerusalem.

3.1 Ma’ale Adumim: The Settlement Anchor

H&M operates a retail outlet in the Ofer Adumim Mall (also known as Adumim Mall) in Ma’ale Adumim.⁶

• Geopolitical Context: Ma’ale Adumim is one of the largest settlement blocs in the West Bank. It is strategically situated east of Jerusalem to bisect the West Bank, effectively preventing the territorial contiguity of a future Palestinian state.
• Material Support: The presence of international brands like H&M in settlement malls is a critical component of “settlement normalization.” It provides the settler population with a First World consumer experience, incentivizing residence in the territory. Furthermore, the store pays municipal taxes to the Ma’ale Adumim municipality, directly funding the infrastructure (roads, sanitation, security) of the illegal settlement.⁸

3.2 Pisgat Ze’ev: East Jerusalem Encirclement

The audit identified an H&M presence in the Pisgat Ze’ev Mall.⁹

• Status: Pisgat Ze’ev is an Israeli settlement neighborhood in East Jerusalem, established on land confiscated from the Palestinian villages of Beit Hanina and Hizma.
• Economic Impact: Similar to Ma’ale Adumim, this location integrates the settlement into the national commercial grid. The mall serves as a commercial hub for the settlement ring surrounding Jerusalem, reinforcing the de facto annexation of the city.

3.3 The Malha Mall (Jerusalem)

H&M’s flagship store in Jerusalem is located in the Malha Mall.¹⁰

• Nakba Erasure: The mall is constructed on the lands of the Palestinian village of al-Malha, which was ethnically cleansed and depopulated during the 1948 war.
• Complicity: While Malha is within the declared municipal borders of Jerusalem (West), the operation on this specific site carries significant historical weight regarding property rights and the erasure of Palestinian heritage. The mall serves a dual population but is structurally integrated into the Israeli hegemony over the city.

3.4 Eilat: The Tax-Free Zone

H&M operates in the Ice Mall Eilat.¹³

• Economic Function: Eilat is a Free Trade Zone (VAT-free). H&M’s presence here is a driver for domestic and international tourism shopping. While within the Green Line, this operation supports the broader economic resilience of the state by enhancing the attractiveness of its southern tourism hub.

Table 3: Retail Locations in Contested Territories

4. Supply Chain Audit: Tier 1 Manufacturing and “Sustained Trade”

H&M’s relationship with the Israeli economy extends deep into its global supply chain. The company utilizes Israeli manufacturers not just for local consumption but as strategic global suppliers for high-technical products such as seamless activewear and intimate apparel.

4.1 Delta Galil Industries: The Strategic Partner

Delta Galil Industries is a massive Israeli textile conglomerate and a key Tier 1 supplier for H&M.¹⁵

• Nature of Relationship: Delta Galil is not a simple cut-and-sew manufacturer; it is a “full-package” provider that handles design, R&D, and manufacturing. H&M relies on Delta Galil for private-label intimate apparel and activewear.
• Settlement History & Complicity: Delta Galil historically operated a significant factory in the Barkan Industrial Zone, a settlement in the West Bank. While reports suggest some operations may have moved due to pressure, the company’s headquarters and tax base remain in Israel. It is a pillar of the Israeli industrial economy.
• Military Contracts: Delta Galil has a history of supplying socks and underwear to the IDF. By maintaining a strategic partnership with Delta, H&M contributes to the viability of a company that services the military’s basic logistical needs.
• Global Footprint: Delta Galil manufactures for H&M in facilities worldwide (Egypt, Vietnam, Thailand) ¹⁷, but the management, profits, and R&D royalties flow back to the Israeli parent company.

4.2 Tefron: The Seamless Tech Nexus

Tefron Ltd is another major Israeli supplier identified in the audit.¹⁶

• Specialization: Tefron specializes in “seamless” knitting technology, used in high-performance activewear.
• Location: Tefron is headquartered in Misgav, in the Galilee region.²⁰
• Military-Industrial Synergy: The seamless technology used by Tefron (and developed in Israel) often has dual-use origins or applications. The Israeli textile sector’s innovation is frequently linked to military requirements for lightweight, durable gear. Tefron markets itself on “innovation,” a sector heavily subsidized by the Israeli state to maintain export dominance.
• H&M Dependency: H&M’s “technical” sports lines rely on this specific Israeli IP, creating a dependency on the Israeli economy for product quality and innovation.

4.3 IKAR (Israel) Ltd: The Textile Aggregator

The audit identified IKAR (Israel) Ltd as a registered supplier in H&M’s Transparency Pledge disclosures.²¹

• Role: IKAR acts as a global sourcing and manufacturing manager. While it has factories in China and Vietnam, the company is Israeli-headquartered (Raanana).
• Aggregator Function: IKAR serves as an aggregator for the textile trade, effectively managing the production for H&M. This places an Israeli firm at the command and control center of a portion of H&M’s supply chain, ensuring that management fees and profit margins are repatriated to Israel.

4.4 Bagir Group: Tailored Complicity

Bagir Group, known for tailored suits, has produced for H&M.²⁴

• Structure: Bagir is an Israeli company (Kiryat Gat) that pioneered the production of suits in satellite factories (e.g., Egypt, Ethiopia) to take advantage of Qualified Industrial Zones (QIZs).
• QIZ Context: The QIZ agreement allows duty-free access to the US market for goods produced in Egypt/Jordan if they contain a specified percentage of Israeli content. While H&M is European, the utilization of Bagir supports this geoeconomic structure designed to normalize Israeli trade integration in the Middle East.

5. Upstream Supply Chain: Raw Materials and Settlement Laundering

The “Settlement Laundering” requirement necessitates an investigation into raw materials labeled as “Made in Israel” that may originate in the Occupied Territories.

5.1 The “Better Cotton” Loophole

H&M is a major user of the Better Cotton Initiative (BCI).²⁶ Israel is a BCI-certified cotton producer.

• Settlement Agriculture: Significant quantities of Israeli cotton are grown in the Jordan Valley, located in the occupied West Bank.
• Mass Balance System: BCI operates on a “mass balance” system. Cotton from various farms (including settlement farms) is ginned and mixed. The credits are traded, but the physical cotton is commingled.
• Risk: There is a High Risk that “Better Cotton” sourced by H&M’s suppliers (like Delta Galil or IKAR) contains physical fibers grown on confiscated Palestinian land in the Jordan Valley. The “Produce of Israel” label on the final bale or yarn effectively launders the settlement origin of the fiber.

5.2 Nilit: Petrochemical Fibers

H&M sources Nylon 6.6 from Nilit, based in Migdal HaEmek.²⁷

• Ecological/Economic Impact: Nilit is a petrochemical giant. Sourcing from Nilit supports Israel’s heavy industry sector. Nilit markets “Sensil” as a sustainable product, yet it is a product of the Israeli extractive economy.
• Supply Chain Integration: Nilit fibers are likely used by Tefron and Delta Galil for H&M products, creating a vertically integrated “All-Israeli” value chain for specific activewear lines.

5.3 Dead Sea Minerals (Ahava Connection)

Forensic evidence places H&M management in meetings with Ahava Dead Sea Laboratories in 2008.¹⁰

• Mitzpe Shalem: Ahava’s primary factory is in the illegal settlement of Mitzpe Shalem.
• Current Status: While H&M denied a direct private label deal at the time, the H&M Home and H&M Beauty lines must be audited for “Dead Sea” products. Any “Dead Sea” salt or mud product labeled “Made in Israel” is, by definition, an extraction of natural resources from the occupied territory, constituting pillage under international law. The risk remains Medium-High for the beauty segment.

6. Strategic Investment Flows: FDI and the Tech Ecosystem

The audit distinguishes between “Sustained Trade” (buying clothes) and “Strategic FDI” (capital investment). H&M has crossed this threshold through its venture capital arm, H&M Group Ventures (formerly H&M CO:LAB).

6.1 Syte: Financing Surveillance Tech

H&M Group Ventures invested directly in Syte, a Tel Aviv-based startup.²⁹

• Technology: Syte provides “Visual AI” for e-commerce (image recognition).
• Dual-Use Risk: The Israeli “Visual AI” sector is heavily populated by veterans of Unit 8200 and the Israeli defense intelligence establishment. The algorithms used for “finding similar dresses” are virtually identical to those used for “identifying suspects” in surveillance grids.
• Strategic Complicity: By investing equity into Syte, H&M is capitalizing the Israeli high-tech sector, which is the engine of the state’s economic resilience. This goes beyond trade; it is state-building.

6.2 Zeekit: The Military-Civilian Pipeline

H&M CO:LAB was an early backer of the ecosystem supporting Zeekit (later acquired by Walmart, but relevant to H&M’s tech adoption).³¹

• Founder Profile: Zeekit was founded by Yael Vizel, a former Captain in the Israeli Air Force (IAF).
• Tech Origin: The technology used to map clothes onto bodies was explicitly adapted from IAF topographical mapping technology used for military missions.
• Implication: This is a textbook case of the “military-civilian pipeline.” H&M’s engagement with such firms validates and monetizes military R&D, creating a feedback loop where military service creates commercial value for the Israeli economy.

6.3 Voyado

H&M also invested in Voyado.³³ While Voyado is Swedish, it has engaged in the Israeli market and tech ecosystem. The primary risk, however, remains concentrated in the direct Israeli investments like Syte.

7. The Aggregator Nexus: Fresh Produce and “It’s Pleat”

The audit addressed the specific requirement to investigate fresh produce sourcing (Mehadrin, Hadiklaim, etc.) for H&M’s in-store cafe concept, “It’s Pleat”.

7.1 Supply Chain Architecture of “It’s Pleat”

“It’s Pleat” operates primarily in Sweden and select European flagships.

• Sourcing Model: Snippet ³⁴ identifies purchasing managers for “It’s Pleat” in Stockholm. The supply chain for fresh food is typically regional to ensure freshness.
• Aggregator Check: There is No Evidence in public customs data or supplier disclosures linking “It’s Pleat” centrally to Mehadrin, Hadiklaim, or Agrexco. The logistics of shipping fresh Israeli avocados or citrus to Stockholm for a small cafe chain are economically inefficient compared to sourcing from European hubs (which may, in turn, source from Israel).
• Indirect Risk: While no direct contract exists, European wholesalers often blend Israeli produce (potatoes, citrus) during the winter window (Dec-April). Therefore, “It’s Pleat” likely sells Israeli produce inadvertently via wholesalers, but not through a direct “Aggregator Nexus” contract.

7.2 Seasonality Analysis (Winter Sourcing)

The user queried “Winter Sourcing” for potatoes/citrus.

• Textile Seasonality: The true “Winter Sourcing” risk for H&M is Textiles. Israel’s manufacturing strength (Delta Galil, Tefron) is in technical fabrics—thermal wear, seamless layers, and synthetics.
• Pattern: H&M’s procurement of winter collections (sold Nov-Feb) relies heavily on the R&D and production capabilities of these Israeli firms. The “Winter” seasonality in this audit points to Tefron’s seamless activewear rather than Mehadrin’s oranges.

8. Financial Assessment and Ranking

8.1 Economic Value Estimation

• Global Revenue: ~$22.78 Billion USD.³⁵
• Israel Footprint: ~22-24 Stores.
• Market Performance: H&M Israel is described as a “high performing” market with exceptional sales per square meter.³⁶
• Value Extraction: Through the franchise agreement, H&M extracts 4-6% of gross sales as royalties. Conversely, the Horesh family retains the operational profit, funding their diversification into military supply (Union Motors).

8.2 Risk Ranking Scale

Based on the Economic Complicity framework, H&M is ranked as HIGH COMPLICITY.

9. Conclusion

The economic footprint of H&M Group in Israel is not merely that of a global retailer serving a local market. It is a footprint characterized by structural integration with the mechanisms of occupation.

1. Ideological & Material Support: By franchising with Match Retail (Horesh Family), H&M funnels consumer revenue into a conglomerate that physically equips the IDF with armored vehicles. This is a direct pipeline from “Fast Fashion” to “Military Logistics.”
2. Territorial Violation: The operation of stores in Ma’ale Adumim and Pisgat Ze’ev violates the international consensus on the illegality of settlements. H&M is not a neutral observer; it is a municipal taxpayer to the settlement regimes.
3. State-Building: Through H&M Group Ventures, the company actively invests in the “Start-Up Nation” narrative, validating and financing technology (Syte) that emerges from the military-intelligence complex.

Appendix: Detailed Data Tables

Table A: H&M Israel Store Locations in Occupied Territory

Table B: The Horesh Family Nexus (High Proximity Indicator)

Table C: Tier 1 Manufacturing Suppliers (Israel)

Table D: Strategic FDI Portfolio (H&M Group Ventures)

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