The Swedish clothing retailer, which has around 4,400 stores around the world, said it would gradually “phase out” its activities in Myanmar while probing the allegations.  

“We have been monitoring the latest developments in Myanmar very closely and we see increased challenges to conduct our operations according to our standards and requirements,” an H&M spokesperson told Fortune. “After careful consideration we have now taken the decision to gradually phase out our operations in Myanmar.” 

The world’s second-largest fashion retail group doesn’t directly own factories in the country but sources production to local suppliers. H&M’s Myanmar operations involve 39 factories and 26 suppliers as well as nearly 42,000 employees.  

The decision comes shortly after a damning report by the Business and Human Rights Resources Centre, a group that researches the state of human rights in different industries, published earlier this week. The group found human rights abuses affecting 108,000 garment workers in the country between February 2021 and 2023.

BHRRC found an uptick in allegations of labor abuse since Myanmar’s 2021 military takeover—and H&M is one of the brands linked to such cases. The allegations range from wage theft to workplace harassment.   

Other major clothing retailers including Zara’s parent company Inditex and Irish fast-fashion brand Primark were also named in the report for a high count of human rights abuse allegations. 

Inditex told Fortune in a statement that it was in the process of a “phased and responsible exit” from Myanmar: “As a result, we continue to reduce the number of active manufacturers in the country.”

Similarly, a representative from Primark told Fortune that the company had stopped sourcing products from Myanmar.

“We were aware of the allegations raised by the BHRRC previously and have investigated and attempted remediation in each case,” the spokesperson said.

Retail brands like Mango and Marks & Spencer have also made similar moves.

Human rights abuses in the clothing industry 

The clothes manufacturing sector has faced regular criticism for its poor track record on human rights. Cases of workers being subject to poor working conditions or low wages have become widespread in recent years—and, like those in Myanmar, have involved some of the most popular retail names. 

Concerns surrounding labor abuse in Myanmar have been on the rise, leading a series of brands to withdraw their supply-chain operations.

“The garment sector has seen substantial job losses and underemployment, alongside a proliferation of labour rights abuse against its largely female workforce,” BHRRC said. 

The British advocacy said that years of progress through economic liberalization had been reversed following the military’s seizure of power two years ago.

“Even as the sector has contracted since the events of 2021, apparel remains one of Myanmar’s largest employers, accounting for more than 30% of the country’s total exports,” the group added. 

This isn’t H&M’s first time being caught amid allegations of human rights abuses—the brand came under fire in the past following reports linking the forced detention of China’s Uyghur Muslims to its supply chain operations. The retailer said it would stop using cotton from the Xinjiang region due to concerns about forced labor, and faced boycotts from Chinese consumers as a result.

Update, 18 August, 2023: This story has been updated with comments from Primark.