Gap Inc. is one of the world's largest clothing retailers. It is
also an industry leader in ethical sourcing and supply chain
management through a social responsibility programme that advocates
human rights as an essential component of quality and standards
Under its brands Gap, Banana Republic, Old Navy, Piperlime and
Athleta, Gap Inc. is one the world's largest specialty retailers
with more than 3,000 stores and 130,000 employees around the world.
Gap outsources to more than 1,500 production sites in 50 countries,
of which more than 90% are located in developing countries.
Gap's reputation for ethical supply chain management is largely
the result of the company's commitment to standards enforced
through its Code of Vendor Conduct (COVC) and Vendor Compliance
Agreement. Gap's COVC establishes the legal, social and
environmental requirements that all manufacturers and factories
must meet in order to do business with the company. The code is
based on conventions established by the International Labour
Organization (ILO) and aligned with the policies of Social
Accountability International (SAI) and the Ethical Trading
Once vendors are approved, they are required to be compliant
with Gap's COVC and also to ensure that they implement the code and
agreement throughout their own supply chains. To enforce these
standards, Gap monitors 99% of its garment factories through both
announced and unannounced visits conducted by vendor compliance
officers, who are part of the 120 employees in Gap's global
In recognizing that monitoring alone won't achieve lasting,
large-scale improvements in working conditions, Gap introduced
capacity-building programmes that focus on working with factories
to develop management skills and systems that increase factory
accountability for meeting standards.
Key elements of the capacity-building programme include:
TRADE FORUM EDITORIAL INTERVIEW
with Dan Henkle, Senior Vice President, Global
Responsibility, Gap Inc.
TF: Gap Inc. has rigorous standards and quality systems
in place through its COVC and Vendor Compliance Agreement, but what
are the challenges you face in enforcing them - particularly in
DH: While we have made a lot of progress in the
past 15 years in terms of alignment around the codes that are being
used and what has been asked of the vendors, there are still some
challenges with the level of enforcement of those codes. Many
factories work with more than one buyer, for some that may be as
many as 20 brands. So if a factory has five buyers and each buyer
has different enforcement rigour, then that sends mixed messages to
the supplier. I liken it to an employee of a company having five
different bosses and each boss asks the employee to do five
different things, then it becomes challenging and confusing. So
there can be one set of rules (which are the codes), but it is the
level of expectation that is the same across different buyers which
is important. If you take that five-buyer example, if Gap gives 40%
of the capacity of the factory, then we have fairly significant
amount of leverage and influence in that factory, but it's not the
same in a scenario where we are one of the buyers but use only 5%
of the factory's capacity. As an example, take a situation where
one buyer does not enforce the amount of overtime that is worked
and another that has very clear, non-negotiable expectation of the
amount of overtime worked. What does the factory manager do at that
time? And if you are a relatively small brand operating in a
factory, it is even harder to have a big voice at the table.
TF: How difficult is it to enforce quality and standards
codes across multiple countries?
DH: Lack of regulation by some governments can
be one of the things that makes this work challenging. Some
countries have decent monitoring systems in place but others have
much less infrastructure and resources devoted to inspections. In a
country that has limited labour inspection standards, we recognize
the need to build up monitoring teams.
TF: Is there a need for more internationally recognized
DH: Yes. Initiatives like the ILO and
International Finance Corporation (IFC) Better Work programme (see
box) is expanding into other countries. That definitely helps
because they are using one set of standards and one monitoring
system. We think this is really important, but it is not something
that can be replicated easily. Even with a good set of systems and
monitoring protocols, there is still a need for buyers to look at
the findings from compliance audits and use the leverage they have
with suppliers to implement the recommended improvements.
TF: So, although Gap is a market leader in terms of
ethical sourcing, unless the rest of the industry implements
similar standards, there will be continual challenges?
DH: In our first social responsibility report
(2004), we basically said that there are no finite answers to
complex societal issues. The reality is there is not a global
solution to any of these challenges, but if we adopt best practice
and everyone does their part, including non-governmental
organizations and multilateral institutions, then it can work
TF: Do you have any tips - particularly in terms of
quality and standards - for suppliers from developing countries
looking to sell to buyers such as Gap?
DH: There is a lot of expertise out there to be
leveraged. For example, SAI's certification system, SA8000 (see
box), meets the expectation of most international buyers and is
very practical. The thing that I like about this type of system is
that they have worked with thousands of businesses across multiple
industries, not just apparel, in numerous countries and can bring
best practice examples to the table.
TF: From Gap's point of view, what is the business case
for upholding ethical standards and quality beyond corporate social
DH: There are a number of components beyond
doing the right thing. From our experience, it is unlikely that a
factory where workers are mistreated or working in unsafe
conditions will produce the highest-quality product in the
marketplace. Employees also want to feel they are working for a
company that has integrity and is trying to do the right thing.
It's particularly important to the new generation workforce and for
attracting talent to your organization. It's a big deal for any
organization. And customers are asking more questions.
TF: What evidence do you have of consumer support for
ethical products? And how do you communicate with
DH: The rise of organic foods and organics
generally suggests that consumers are more concerned about how
products are made. There is a higher level of awareness about how
products are made and with that, an increase in expectation. One of
the things that Gap has been trying to work out is how to convey
information about the product to customers in a way that doesn't
sound like we are just trying to pat ourselves on the back. Every
product has attributes - whether it is the fabric it was made from
or how it was made - but there is usually a lot of information. The
challenge is how to distil it into a message that gives the
customer a little bit of information on that product but also gives
them the resources to dig deeper if they want. That's what we have
been testing with Harvard University (see box). I think over the
next 10 years, companies will become more experienced in relaying
this type of information, just like they've become experienced in
communicating the quality and value of a product. We are already
seeing this in the marketplace. In some cases you may see companies
put out statements and they might be accused of 'green washing', or
overstating, but sometimes the key messaging is so subtle that no
one is ever going to pick it up. We believe that customers are
increasingly looking at these issues and wanting more information.
We have years ahead of us to determine how that all works itself
out, but that is the journey that we are on right now.
For more information: www.gapinc.com/socialresponsibility.
HARVARD UNIVERSITY STUDY
Putting the Value on Social Product Labelling to the
Gap Inc. is one of a number of major United States retailers
participating in an ongoing Harvard University study into the
impact of ethical certification and labelling programmes in
developing countries and consumer demand for ethically labelled
In a paper written by Michael J. Hiscox and Nicholas F.B. Smyth
in 2005, Is There Consumer Demand for Improved Labor Standards?
Evidence from Field Experiments in Social Product Labeling,
evidence documented from experiments conducted in a major retail
store in New York City indicated that sales rose by 10% for items
labelled as being made under good labour standards. Furthermore,
the demand for the labelled products actually rose with price
increases of 10% to 20% above pre-test (unlabelled) levels. Harvard
University is continuing further studies, the results of which are
yet to be published.
For further information and a copy of the above-mentioned
paper, visit www.people.fas.harvard.edu/%7Ehiscox/consumers.html.
SA8000 is one of the world's pre-eminent social standards and is
a recognized benchmark among the voluntary codes and standards
initiatives that employers - including well-known brands - use to
measure their own performance and responsibly manage their supply
chains. Grounded in the principles of core ILO and United Nations
conventions and an ISO-style management system, SA8000 is
applicable to virtually all industrial sectors.
SA8000 was established by SAI, a global, multi-stakeholder,
standards-setting organization whose mission is to advance the
human rights of workers around the world.
SAI's affiliate, Social Accountability Accreditation Service,
accredits qualified audit organizations to certify compliance. More
than 1.2 million workers are employed in some 2,100
SA8000-certified facilities in 63 countries across 66 industrial
sectors. SAI also offers training sources and develops and manages
public-private partnerships worldwide.
For further information visit www.sa-intl.org.
ILO/IFC BETTER WORK AND BETTER FACTORIES
Cambodia and Viet Nam
Gap Inc. supports the Better Work programme - a joint ILO/IFC
effort. This voluntary, industry-based initiative seeks to
strengthen relationships between international buyers, local
enterprises, governments and worker organizations to improve
working conditions and competitiveness.
In Cambodia, the Better Factories programme aims to improve
working conditions in the country's export garment factories. The
programme is an effective mix of independent monitoring together
with recommended solutions, training and information.
In June 2008, ILO assumed full responsibility for monitoring all
Gap Inc.-approved garment factories in Cambodia. Its third-party
monitoring enables Gap to focus on working with factory management
in capacity building so they can better address their problems and
develop their own systems to improve working conditions.
Gap plans to expand the ILO/IFC Better Work programme into more
countries, including Haiti, Jordan and Indonesia. With the belief
that industry-wide collaboration will take factory improvements
further, reducing duplication and redirecting resources to the
critical work of capacity building, Gap is also working towards a
more unified monitoring system for all industry brands under the
ILO/IFC Better Work programmes.