Rethinking The Supply Chain of Free People

Rethinkingthe

supplychainof FreePeoplein termsof transparencyof circulareconomy

210023347

Fashion Marketing

Tutor: Sarah Cooper

Executive Summary

Consumers are demanding transparency within the supply chain to help form trusting relationships with brands (Jestratijevic et al, 2021) Although the fashion industry has a large impact on the economy, bringing in billions annually (British Fashion Council, 2022), there are still issues with ethical processes within the supply chain (Burns and Mullet, 2020) This suggests companies need to listen to all their stakeholders’ needs, which includes customers (McKinsey&Company, 2022) regarding transparency to inform consumers of its responsible supply chain.

The purpose of this report is to evaluate the role of Free People’s supply chain to give recommendations on ways of developing a circular economy. Free People’s parent company is URBN which has the capacity to improve standards of transparency regarding corporate social responsibility because of its economic benefits. By focusing on the triple bottom line framework which regards people, the planet and profit (Dickson et al, 2009), Free People can make a positive impact.

Introduction

Background of Free People

Free People is a mid-market bohemian fashion brand which targets its products at women who are in their twenties and are adventurous and free-spirited in nature (Free People, n d ) The company’s consumers are people who enjoy travelling as a hobby (Free People, n.d.) and in many of its advertising campaigns the models are situated in nature sceneries, such as the beach which has connotations to the environment. Free People runs on an agile supply chain because it responds to consumers quickly and keeps up to date with emerging trends (Christopher et al, 2004). For example, Free People’s mission statement states that it aims to break and complement current trends in order to spark creativity (Free People, n.d.), therefore it is evident that trends are a focus point for the company Free People’s parent company, URBN had a net income of 1.18 billion in the months of May to July 2022 (URBN, 2022).

In terms of its triple bottom line (Dickson et al, 2009), the economic responsibility appears strong; but this could benefit URBN’s social and environmental responsibilities by improving its supply chain by making it more transparent and working towards a circular economy. Free People could learn from the likes of H&M, which is building a circular economy with help from the Ellen MacArthur Foundation.

Introduction to supply chains

Supply chain management incorporates all aspects of the supply chain for the purpose of successfully sourcing, producing and distributing products to customers (Vonderembse et al, 2006). Strategies can be implemented to manage and improve the efficiency of each stage of the supply chain in terms of a linear model (Hines, 2013) (see appendix B). However, there are many challenges involved in supply chains as the rapid rate of globalisation has made tracking aspects of supply chains so difficult and compromised transparency across the tiers of the value chain (Abbasi and Nilsson, 2012). Therefore, corporations like Free People are faced with ethical issues involved with labour standards such as modern slavery which relies on governmental regulations (Downe et al, 2016). The Modern Slavery Act was implemented in 2015 in the United Kingdom to protect workers and provide accountability to corporations (GOV UK, 2014; Mantouvalou, 2018) However, even though there are rules regarding labour, they are not necessarily regulated. Environmental impacts also fall into the ethical issue category as the production of cheap fast fashion causes detrimental effects to the planet (NiiniMaki et al, 2020). This means that supply chains need to be carefully managed to reduce the damage that is being done to the people and the planet.

What is a circular economy?

For a corporation to classify as having a circular economy it must eliminate waste and pollution, circulate products and materials, as well as regenerate nature (Ellen McArthur Foundation, n.d; Jones, 2021). The benefit to having a circular economy is that it is more sustainable for the future of the planet (Lacy and Rutqvist, 2015). With the changing expectations from consumers, businesses are facing tension to re-think the supply chains to a more sustainable alternative (Burns, 2019), which is where a circular economy could be appropriate. Despite that, implementation of a circular approach can be complex, and the practicalities of circular economies can be misunderstood (Corvellec et al, 2021) That being the case, the current climate crisis is only going to get worse as greenhouse gas emissions must be reduced to avoid negative consequences of global warming (COP27, 2022; IPCC, 2022). This suggests that taking a circular approach or even finding a middle ground between circular and linear could be desirable for businesses as society moves forward.

Rationale Transparency

Free People scored only 14% overall on the Fashion Revolution (2022) transparency index. This index is based on five sections regarding transparency in supply chains and many fashion brands are reviewed every year for it. An important section of the index, with regards to Free People, is governance which looks at who is responsible within the company and has a weighting of about four percent. In this division, Free People scored 45%. This portion of the index focuses on how the people in power implement social, environmental and economic responsibilities and how these affect stakeholders. Free People’s score indicates that the governance is at a mid-range level. Therefore, this links into the debate of rules versus leadership when it comes to ethical behaviour as leaders can be a key factor in enhancing the standards of ethics within organisations (Downe et al, 2016). On the other hand, Nichols (2021) states that rules can have a large influence on people depending on the perceived value of the rule. Stella McCartney is an example of a pioneer in leading change within the fashion industry because of her commitments to sustainability (Radclyffe-Thomas and Varley 2019).

Therefore, when it comes to ethics in supply chains, if there is an expectation for corporations to be morally correct, accountability is more likely to be assumed to make an equilibrium between ethics and profit (Dickson et al, 2009). This means that the rule has value as there are valid consequences which suggests both rules and leadership are important in the governance of supply chains. For Free People, this means following guidelines as well as ensuring there is a good standard of leadership to achieve a circular economy.

Corporate social responsibility

Businesses have the purpose of creating a profit but as part of that it has a level of responsibility to the people and the planet (Wickert and Risi, 2019), this is known as the triple bottom line or corporate social responsibility. Colucci et al (2020) investigated the concept of corporate social responsibility talk and walk which refers to how corporations communicate its responsibilities and how they are implemented. Free People makes various claims on its impact on the planet, especially in terms of circularity. For example, Free People has donated 120,000 units of unsold wholesale clothing to non-profit organisations and this information is available under the subheading circularity (see appendix A). According to Farooque et al (2019), the definition of circularity in terms of supply chains is to restore and regenerate materials to move towards zero waste and this aligns with the Ellen McArthur Foundation definition as well. Although Free People is reducing waste to an extent, it is not regenerating materials or nature which suggests their supply chain is not fully circular. This means that the claim is misleading as it is unclear (GovUK, n.d.), suggesting that Free People is virtue signalling in the shape of greenwashing (Chan et al, 2020). Therefore, clarity in the information that is communicated to the consumer needs to be improved by Free People.

Learning from pioneers

The fashion industry uses a predominantly linear supply chain method (Aggarwal and More, 2020) but there are fashion brands that take a more pioneering approach. Free People can learn from the likes of H&M to transform its supply chain to move towards circularity. H&M has developed a guide called The Circulator (H&M Group, n.d.) that displays easy to read information and clear infographics (See appendix C) about its steps towards a circular economy The use of infographics is useful for marketing as consumers are more likely to comprehend and retain the information (Ritchie et al, 2012; Siricharoen, 2013) which is important as the consumers have a part to play in the supply chain. The way that consumers care for their

clothes after purchase has an impact on the environment as laundry requires a high amount of energy and can leach microplastics into nature (Webb, 2020; Mckinsey&Company, 2020). Aftercare tips are shown on H&M’s website such as removing stains to make clothes last longer. This is something that Free People could take inspiration from to reduce waste in its supply chain and become more circular.

To improve the transparency of Free People’s supply chain it would be beneficial to create a supply chain map of the suppliers on all tiers of the value chain (See appendix D for an example supply chain map for Free People). Currently URBN has part of tier 1 and 2 mapped and aims to complete it by 2025 but only for its ownbrand apparel. Fully mapping out the tiers would demonstrate good governance as it shows the company is willing to take accountability for the transparency of the supply chain (Fashion Revolution, 2022). A brand that aims to do this by 2030 is Asos (n.d.) in an effort to improve its transparency, this shows that there is an emerging expectation for supply chain mapping.

The map could be available to the public to strengthen the corporate social responsibility of Free People and provide a visual representation of the suppliers rather than a list It would also be helpful for the map to be interactive as inspired by Primark’s Global Sourcing Map which tells the consumer about how many factories there are and information about the workers (Primark, 2021). The purpose of this would be to inform and inspire the consumer to get one step closer to change.

Another way Free People could improve its transparency is by moving its supply chain on to the blockchain. Essentially, the blockchain is a de-centralised ledger on which data is permanently recorded (Laurence, 2019). Blockchain increases traceability and can help with transitioning a supply chain to a circular economy because information about a product’s lifecycle can be stored and accessed easily (Wang et al, 2020). Therefore, if Free People began to store its supply chain information on the blockchain, it demonstrates its willingness to be transparent and increases supply chain visibility (Cole et al, 2019). However, as the data is constantly being hashed to lock the information in place (Laurence, 2019), it requires a lot of computing energy which seems counterproductive when the purpose is to become more circular Therefore, in an ideal world, Free People would power its blockchain with only renewable energy to make sure there is not any unnecessary emissions from the electricity that is needed to power the blockchain.

Free People could take a step towards transparency of circular economy by switching to digital care labels. This is because traditional care labels can be confusing to read as not everyone knows what the symbols mean (Bain, 2022). The way that Free People could do this is by replacing its care labels with a QR code that can be scanned through the consumers phone that will open an app containing the care information and material composition details. This makes the care information more accessible to the consumer so that it is easily understood (Yan et al, 2008). Therefore, this could help increase the longevity of the garment as the consumer knows how to look after it properly which subsequently means less waste is produced. It also means that when the item of clothing is at the end of its life, the material composition can be easily identified for the purpose of recycling. This suggests that digital care labels can be beneficial for encouraging customers to consider circularity in post-purchase behaviour.

Circular economy

To make a step towards circularity, Free People could put donation stations at its bricks and mortar stores where consumers can donate old clothes. Some of the old clothing can be upcycled into new clothing that Free People could make a collection out of. This would fit the hippie style that most of Free People’s clothes have and the communications surrounding the collection could emphasise the originality of the clothing as each piece would be entirely unique. As

creativity and free-spiritedness is a trait that Free People’s consumers have (Free People, n.d.), the originality of this collection with the added value that portrays would be desirable for the consumer and for Free People’s image. The consumer would feel involved as they can donate their own clothes and it would satisfy their need for businesses to make changes to be more sustainable (Burns, 2019). Other brands in the fashion industry have already implemented similar concepts such as H&M and Levi’s, which have donation stations in store. Although, H&M provide a financial incentive by giving consumers a voucher in exchange for the old clothes (H&M, 2018). Therefore, this could be a possibility for Free People to encourage the use of the donation station and show its commitment to attempting to be more circular.

Free People could use a 5-year timeline (See appendix E) to help set realistic goals for moving towards a circular economy. For example, in 2023 it would be beneficial to set up a sustainability page on its main e-commerce website that has all the circularity and transparency information easily accessible for consumers. The link to the page would be situated on the main horizontal navigation bar as that is where consumers attention would be drawn to (Nielsen, 2006) The page would include infographics about what a circular economy is and how to care for the clothing for the use of infographics would make it easier to educate the consumers (Siricharoen, 2013). Not only that, but the timeline could be put on the page to provide a clear vision for the future goals and exactly how they will be implemented to satisfy the corporate social responsibility talk and walk (Colluci et al, 2020). In 2024, the donation stations can be set up as it would give time to plan the logistics of how the donated clothes will be taken away

Then in 2025, Free People could aim to switch to digital care labels which would involve transitioning to new labels and developing the QR code system. In 2026, a larger goal of moving the supply chain to the blockchain could be implemented. Finally, in 2027 Free People could strive to have all tiers of the supply chain mapped but the tiers that are mapped before then can be put onto the new sustainability webpage as it progresses.

Finding a middle ground

A full circular economy is an ideal scenario, however it might be impossible to become fully circular. The consumer’s behaviour, which is mostly out of the control of the business, has a huge role to play in a business becoming circular (Lacy et al, 2020). This is because the consumer is the one who chooses their consumption habits and what they do with the clothing once it reaches end of life. Therefore, if consumers are wanting fast fashion and many seasons within the year, then they will push the company to respond to the demand (Purvis, 2010) Post-purchase behaviour is also something that is difficult to control but can be influenced, as consumers can be encouraged to consider aftercare or donating clothes once they are done with them (Mckinsey&Company, 2020). This is where the sustainability page for Free People would be beneficial to take some control of what happens to the products after purchase to ensure circularity is achieved. Although, it is not possible to know for certain if the consumers are being responsible which is why it is unrealistic to expect to have a perfect circular economy

However, by looking back to the roots of how humans were able to create what we have now, it all stems from nature and when looking at systems within nature, circularity exists (Long, 2020). For example, if you deforest the earth, the planet moves further away from equilibrium in the form of global warming to try and gain back balance (Cornell et al, 2012) or in other words, circularity. This is the process of system feedbacks which suggests that supply chains could be looked at the same way as a system in nature. By breaking down the supply chain into inputs and outputs and segregating the supply chain into silos (Hines, 2013), certain stages of the supply chain could be shown to be circular rather than the entire supply chain. Therefore, this could be what a middle ground of circularity might look like as it is more realistic to break down the supply chain to make certain sections circular rather than focusing on the whole supply chain. Taking inspiration from natural systems may help in trying to make a supply chain circular as it provides a general framework for how to create harmony between human activity and nature.

Conclusion

In conclusion, Free People’s supply chain has been examined to provide recommendations on becoming more transparent as well as how to move towards a circular economy. A reoccurring issue of Free People’s supply chain was the lack of transparency as it scored low on the Fashion Transparency Index (Fashion Revolution, 2022). Also, it was found that the corporate social responsibility could be improved as Free People made misleading claims about being circular. The recommendations for improving transparency included supply chain mapping, moving the supply chain to the blockchain and introducing digital care labels. To help with this process, it is useful to take inspiration from what pioneers in the fashion industry are doing to become more transparent such as H&M, Primark, Levi’s and Asos. Free People can take small steps in developing a circular economy, for example, setting up donation stations and involving consumers through a sustainability webpage The main goal for Free People would be to find a middle ground to circularity so that it can still respond to the consumer demand whilst being more responsible to the planet. Therefore, educating consumers on aftercare would provide more control over the post-purchase behaviour. Not only that but breaking the supply chain down and considering the patterns in nature’s circular economy could help to understand circularity and how it can be achieved By taking these suggestions into account, Free People could transform its supply chain to a more transparent and circular one.

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