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Posted Date: 8/13/2009

Doing Well by Doing Good: Gap Inc.'s Social Responsibility Program

By Masha Zager
A child of the 1960s, Gap Inc. came into being with a simple mission: making it easier to find a pair of jeans. Forty years later the company is one of the best-known and most successful specialty retailers, with household-name brands including The Gap, Old Navy and Banana Republic. It's still committed to making jeans-finding easy. But the vast scale of its operations - $14.5 billion in revenues, 3,100 stores and contracts with more than 2,000 factories - has made that mission far more complex.

With size comes greater responsibility - after all, Gap Inc.'s decisions affect the lives of 150,000 employees, a comparable number of factory workers and millions of customers around the world. In the mid-1990s, this responsibility was brought home when activists began drawing attention to the living conditions of factory workers producing clothes for many well-known brands. Gap responded in 1996 by forming a global compliance team, drawing up a vendor code of conduct covering issues such as child labor and wage standards, and monitoring suppliers against the code of conduct.

Dan Henkle, now Gap's senior vice president for social responsibility, says: "That was an important step in the right direction ... but we're not in the factories every day. How do you ... have input on a more regular basis?"

The answer, Gap found, was to place people close to the worksites who knew the language, culture and local issues. The company began hiring compliance team members in the countries where its factories were located, and also brought in members of the human rights community who were involved with those countries. - give a lot of credit to those stakeholders and relationships," Henkle says.

"When concerns are brought to their attention and then to our attention, we can respond sooner rather than later." The great majority of factories have succeeded in bringing their practices into compliance with the standards - with or without technical assistance - but occasionally Gap Inc. is forced to terminate a vendor relationship.

Social responsibility is good business
When the compliance team began sharing its findings with internal business partners, it found that firms treating their workers poorly tended to have production problems, too. Abuse of workers often signals a general inability to manage an operation. "You don't see it often where someone can master compliance with the code of vendor conduct and fail on quality, production planning and on-time delivery," Henkle says. "These things are connected."

The good news is that, in training vendors to comply with the code of conduct, the compliance team raises managers' overall competence levels, with the result that quality control and timeliness also improve.

Becoming involved in factory workers' living conditions led the compliance team to see more issues where they could - and should - make a difference, and the group began envisioning its role as broader than monitoring code compliance. Many new community-based programs evolved organically out of the vendor compliance effort.

For example, because a third of the garment workers in Lesotho are HIV-positive, the compliance team knew it was "missing an important part of the equation" by ignoring the effect of the epidemic on workers' lives and health. In 2006, working with suppliers, external organizations and the government, Gap launched Apparel Lesotho Alliance to Fight AIDS (ALAFA), an organization that provides free AIDS testing and treatment. ALAFA, which is now supported by a number of other apparel firms, won the Drivers of Change award last year from the Southern Africa Trust.

In Sri Lanka, compliance team members realized that the women working in its suppliers' factories all had second full-time jobs - gathering clean water for their families. If clean water were more readily available, they reasoned, the women's quality of life and their productivity could both be dramatically improved. So the company collaborated with supplier Brandix Lanka to fund the Water & Women program, which digs tube wells - simple devices for pumping and filtering water - in workers' villages.

Henkle says: "If you have your eyes open and understand what's happening, you can improve outcomes for the company and the lives of the people impacted by the program."

Setting a policy agenda
To help focus its efforts, Gap Inc. works with a UK-based organization called SustainAbility in order to winnow the range of possible issues to those that are most significant to its business and that offer the greatest hope of success. It then reviews these ideas with knowledgeable activist organizations before going forward. "In many cases they agree we've analyzed it correctly, but sometimes they say: "What were you thinking" Henkle says.

Out of this assessment process came a decision that suppliers' working conditions should remain the top priority, but that environmental and climate-change issues deserved more attention. Gap joined the Environmental Protection Agency's Climate Leaders program, an industry-
government partnership that helps companies develop comprehensive climate-change strategies; between 2003 and 2007 it reduced energy consumption in its stores by 12.7 percent. "Of course, we're saving money as well," Henkle says. "That's the beauty of it - it's a win-win situation."

Gap Inc.'s distribution centers are now recycling 85 percent of their cardboard, with huge savings in waste disposal. Shipping facilities are experimenting with new packing methods that can squeeze more garments into a box without wrinkling them. And, in response to customers' concerns, Gap has begun using more sustainable fabrics - organic cotton wherever possible, "better" cotton when organic-certified cotton isn't available, as well as bamboo, silk, soy and others.

Now the company is grappling with explaining these fabric categories to customers. The goal is to make it easier for concerned customers to find eco-fabric garments in the stores, without causing information overload. A slogan in the Banana Republic stores ("Greener. One step at a time.") and an elephant logo are a good first step. "Have we figured out the formula? We're still trying," Henkle says.

Another successful environmental effort is the Gap Clean Water Program. Gap's denim products are dyed and chemically treated before being washed; the dyes and chemicals in the laundry wastewater can adversely affect local water quality if they are not removed. In 2003 Gap began to develop water quality guidelines for the denim laundries and asked the laundries to submit wastewater effluent to a certified laboratory for compliance testing. Today, all 97 laundry facilities participate in the program.

Environmental consultancy CH2M HILL analyzes the testing submitted by laundries, evaluates and manages the data, and provides compliance reports to Gap. As with the Vendor Code of Conduct, Gap Inc. provides technical support to help suppliers bring their operations up to standard.

Geoffrey Geist, Gap Inc.'s manager of global responsibility, explains: "Our social responsibility programs have illustrated to us the importance of going beyond simply monitoring. Although monitoring is an important aspect of any program, positive real change comes from investing time and resources into training the people who own and operate the laundries and factories that we work with."

Gap Inc. also operates community investment programs in the communities where its stores are located. In the developed world, it funds youth programs such as Career Launch, a career exploration and job readiness program, and it brings young people into Gap Inc. stores as paid interns.

The final component of the social responsibility program is support for the company's own employees. Gap Inc. holds itself responsible for fair treatment of employees in the same way it holds its suppliers responsible. It received a 100 percent score on the Human Rights Campaign's Corporate Equality Index, which rates companies on key indicators of fair treatment for GLBT employees, and has been rated one of the top 30 companies for executive women by the National Association of Female Executives. Work/life balance, professional development, and protection from harassment and discrimination are all goals of the company's HR policies.

Henkle says Gap Inc.'s approach to social responsibility can be adapted by any other company, even in the current economic environment. Gap has succeeded in supporting its suppliers' employees and communities, its own employees and their communities, and the environment, in ways that contribute to its own bottom line, and Henkle thinks any other company could do the same.

What companies shouldn't do is simply follow leaders like Gap Inc. Rather, they need to put in the work necessary to find the programs that are right for them. "If these issues are going to be sustained in the long term, they have to make sense and fit with your being a successful company," Henkle says. "What are the most material issues for you? You need to get input from external and internal experts. ... Develop synergies internally and get connected externally, listening to experts. I believe in that strongly."

Masha Zager is a New York City-based free-lance writer who specializes in business and technology.

Editor's Note: For more information about Gap's social responsibility program visit http://www.gapinc.com/public/SocialResponsibility/socialres.shtm



Fast Facts
* Gap Inc. is an international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies.
* First store opened in San Francisco in 1969
* Brands include Gap, Banana Republic, Old Navy, Piperlime, and Athleta
* 3,149 stores in the United States, the United Kingdom, Canada, France, Ireland and Japan
* Franchise business started in 2006 and now includes 100 Gap and Banana Republic stores in Asia, Europe, Latin America and the Middle East
* Fiscal 2008 net earnings (year ending 1/31/2009): $967 million, up 16 percent from 2007
* Fiscal 2008 revenue: $14.5 billion, down from $15.8 in 2007
* More than 150,000 employees in headquarters offices, stores and distribution centers

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