GAP INC.
2004 SOCIAL RESPONSIBILIT Y REPORTTwo Folsom Street
San Francisco, CA 94105
www.gapinc.com

facing challenges
ﬁnding opportunities
2004 SOCIAL RESPONSIBILIT Y REPORT

“Project Swabhiman has helped me through personal
difﬁculty. I learned a new skill — handwork which will
be beneﬁcial for me in the future — and I am earningmoney and have a bank account which helps me insaving money.”
Anita, 20 years old

On the cover: Women embroidering Old Navy shirts at the Project Swabhimansocial welfare home, Delhi, India, February 2005.
Founded in 2003 with support from Gap Inc., Project Swabhiman is a joint effort
with the Delhi government’s Social Welfare Department and two local
non-governmental organizations, Navjyoti and Partners in Change, to help
women who have been victims of domestic violence.
The program offers participants shelter, support services and job training,and provides them with a clean and safe work environment in which the
intricate garment handwork the region is known for can be produced underethical conditions.
The name “Swabhiman” was chosen by the women participating in the project.
It is Hindi for “self-respect, self-pride and dignity.”

2

FROM PAUL PRESSLER

4FISCAL YEAR 2004 IN REVIEW6REGIONAL BREAKDOWN OF SOURCING COUNTRIES ANDSIGNIFICANT GAP INC. SOCIAL RESPONSIBILITY INITIATIVES

8
12
14
28
34

FORGING SUSTAINABLE SOLUTIONS
Goals
The Art of Factory Monitoring
Integrating Labor Standards into Our Business Practices
Progress Through Partnerships

42

EMPLOYEES

46

COMMUNITY INVOLVEMENT

48

ENVIRONMENT, HEALTH AND SAFETY

52

STATEMENT FROM THE PUBLIC REPORTING WORKING GROUP

53

GRI INDEX / U.N. GLOBAL COMPACT INDEX56

GLOSSARY

Gap Inc. 2004 Social Responsibility ReportFrom Paul Pressler
President and Chief
Executive Ofﬁcer, Gap Inc.
We’ve taken
importantsteps toward

In the days after we released our ﬁrst social responsibility report last year, it wasn’t easy to see headlines
like, “Gap admits factory abuses.”safer conditions

But this was more than offset by positive responses

and better

who told us how much they appreciated our candor

treatment for

challenges described in the report.

workers
in garment
factories, but
the socialfrom the media, employees and other stakeholders– and how they wanted to work with us to address the

Their response renewed our commitment to improving garment factory conditions, and reinforced ourbelief that talking about challenges is an important
step toward resolving them.

responsibility

Of course, we know that driving change of this mag-issues acrosssafer conditions and better treatment for workers in

the industry
remainnitude isn’t easy. We’ve taken important steps toward
garment factories, but the social responsibility issues
across the industry remain immensely complex.

immensely

I’m optimistic, however, that progress in our industry

complex.

thing we’ve seen, including improved labor standards,

over the next decade will be more profound than anyfactory conditions and business practices – because
ethical sourcing represents a better way of doing
business in a global economy.
That doesn’t mean we expect our efforts to create
a competitive advantage. While ethical sourcing is an
essential part of the long-term growth and sustainability of our business, our goal is to help improveconditions across the apparel industry as a whole.
And we know that’s not something we can do alone.
Over the past year, we’ve learned the power ofcollective engagement, and of open, honest discussion
about the issues that we and many other companies
face. As such, we have been expanding our participation in collaborative efforts.

2

FROM PAUL PRESSLER

In Cambodia, for example, we continue to support

Most important, we know that our success depends

the International Labor Organization’s (ILO) factoryon our ability to engage and inspire our more thanmonitoring and training efforts, which, according to a

150,000 employees. We are committed to listening toWorld Bank survey, are helping the country compete

their needs, providing an inclusive environment andmore effectively in the international apparel market.

investing in their training and development so they

And we recently partnered with the Internationalcan build rewarding careers with us.

Finance Corporation’s Mekong Private Sector Development Facility (IFC/MPDF) to launch a new managerial

Community giving is also deeply embedded in ourskills training program for factory supervisors.

company’s values. In 2004, our employees spentapproximately 73,000 hours volunteering in their

The elimination of trade quotas represents an historiccommunities. To encourage their involvement, we

shift in our industry, changing how apparel retailers

provide time off work to volunteer, as well as mon-source their products. This creates new challenges,

etary donations to the organizations they support.

but it also creates new opportunities to build strategic
relationships with garment manufacturers who share

Following the tsunami in South Asia, we reached out

our commitment and values.

to support garment workers and their communities
in the region. Gap Foundation double-matched em-

In 2004, I visited one such garment manufacturer inployee contributions and donated additional funds to

India. His factories provide workers with childcare

contribute $2.3 million to relief efforts. I just met withfacilities, free eye care and access to medical services.

our team which has been on the ground in Sri Lanka

And he has incorporated sound environmental prac-and India ensuring that these funds go to the areas

tices, like rainwater harvesting, into his operations.

where they’ll do the most good over the long-term.

He sees that social responsibility is good business,and, as a result of his efforts, his turnover rates are

We’re constantly ﬁnding new ways to reduce ourlow and his productivity is high.

impact on the global environment through improvements in how we source, distribute and sell our

We know that, unfortunately, this example isn’t the

products. Old Navy, for example, recently redesigned

norm. So we remain committed to working with gar-its hangers to make them easier to recycle and will

ment manufacturers to help them improve.

introduce a new recycling program later this year.
And last year, we piloted a new water quality program

For instance, we are partnering with the China

for denim laundries.

Association of Enterprises with Foreign Investment(CAEFI) and several leading companies to form theThis report highlights the progress we’re making in

Better Workplace Foundation in China. This groupseveral important areas. At the same time, it under-

maintains an ongoing discussion about labor laws

scores the challenges we’re facing and some of thewith the Chinese government, and will help factory

opportunities we’re ﬁnding to improve the way we doowners understand how better labor standards canbusiness and collaborate on projects that can become

make their businesses stronger.

models for lasting change in our industry.

Examples like this are encouraging and reinforce

Thank you for taking the time to learn more about ourthat making progress requires going beyond what’s

efforts. We look forward to sharing more information

expected. That’s why we’re continuing to push thein the years to come.

boundaries of what’s possible, piloting new programs
and learning along the way.
These same principles of exploring, collaborating
and continuous learning shape our efforts across thecompany and have become part of our culture.
Gap Inc. 2004 Social Responsibility Report

FROM PAUL PRESSLER

3

Fiscal Year 2004 In Review
COMPANY PROFILE
Gap Inc. is a leading international specialty retailer offering clothing, accessories and personal care products
for men, women, children and babies under the Gap, Banana Republic and Old Navy brands, with a fourthbrand, Forth & Towne, launching in 2005. Founded in 1969 by Doris and Don Fisher in San Francisco, California,
Gap Inc. has grown from a single store with a handful of employees to approximately 3,000 stores in the UnitedStates, United Kingdom, Canada, France and Japan, with more than 150,000 employees. In the United States,
customers may also shop the company’s online stores.
A public company, Gap Inc. is traded on the New York Stock Exchange and is listed on the Calvert Social Index,
Domini 400 Social Index, Dow Jones Sustainability Index, and the FTSE4Good US 100 and FTSE4Good Global Indices.
Below, we provide a summary of our ﬁnancial results and an overview of our accomplishments and goals in key
areas of social responsibility.

FINANCIAL PERFORMANCE
In 2004, Gap Inc. continued to focus on offering trend-right product and delivering it through engaging, easyto-shop environments. We saw an 11 percent increase in earnings, and our commitment to strong ﬁnancial
management helped restore the company’s corporate credit and debt ratings to investment-grade this year.
2003

2004

Net sales$15.85 billion$16.27 billion

Net earnings$1.0 billion$1.1 billion

Net earnings per share

$1.09

$1.20

FORGING SUSTAINABLE SOLUTIONS IN OUR SUPPLY CHAIN (PAGES 8 – 41)
Last year, we continued to take a multi-pronged approach to improving labor standards in our supply chain. In
addition to inviting Social Accountability International (SAI) and Verité to evaluate our factory monitoring program, we explored ways to further integrate labor standards directly into our supply chain operations, expanded
our stakeholder outreach and increased our participation in multi-stakeholder initiatives.
2003

2004

Factories inspected1

94%

99.9%

Factories rejected

16%

15%

Number of factory revocations due tonon-compliance with Code of Vendor Conduct

136

70

Going forward, we will focus on a four-part strategy to improve working conditions: monitor factories, integratelabor standards into our business practices, collaborate with partners to drive systemic, industry-wide change,
and communicate openly about our goals, successes and challenges. Areas of particular importance include
evolving toward more thorough inspections and sustainable solutions that address root causes, building greater
vendor ownership of compliance, and working toward consistency within the industry through greatercollaboration and standardization.
1 Garment factories that were approved for production for all of ﬁscal year 2003 and all of ﬁscal year 2004, respectively.

4

FISCAL YEAR 2004 IN REVIEWEMPLOYEES (PAGES 42 – 45)
We are dedicated to making Gap Inc. a place where people can build their careers. In 2004, our Executive Leadership Team introduced a new cultural framework anchored in our core values. We also launched a mandatory
ethics course and rolled out a new program designed to help employees maximize the beneﬁts we offer. In the
coming year, we will focus on further enhancing our diversity programs and exploring new ways to retain anddevelop our full-time and part-time employees.

COMMUNITY INVOLVEMENT (PAGES 46 – 47)
Gap Foundation helped drive record levels of employee volunteerism last year. With an emphasis on programs
that serve children, youth and families, we provided millions of dollars in cash grants and in-kind donations toorganizations in the communities where we work, live and source our products. After the December 2004 South
Asia tsunami, we double-matched employee contributions and pledged $2.3 million for relief efforts.
2003

2004

Value of cash donations$6 million$8 million

Value of in-kind donations$12 million$25 million

Employee volunteer hours

21,96572,937

One of our biggest opportunities to increase the impact we have on communities is energizing volunteers at theretail store level. We are piloting a localized volunteer and grantmaking effort in our Denver-area stores andhope to apply learnings from this experience to other regions.

ENVIRONMENT, HEALTH AND SAFETY (PAGES 48 – 51)
In 2004, we were pleased to see reductions in average store energy consumption and rates of employee injury.
We conducted our ﬁrst high-level environmental assessment to identify the environmental impacts of ouroperations, which clariﬁed the need to focus on four key areas: packaging, energy consumption, waste andrecycling, and water quality.
2003

2004

Average store energy consumption

32.35 kWh/ft2 per year

31.56 kWh/ft2 per year

Employee rate of injury per 200,000 hours worked

4.86

4.43

This year, our Risk Management and Product Integrity teams will continue their efforts to enhance the safety of
our work environments and products, while our environmental efforts will concentrate on the four areas
identiﬁed in the assessment we conducted last year. As a participant in the U.S. EPA’s Climate Leaders program, weare also committed to driving further reductions in our greenhouse gas emissions.

Gap Inc. 2004 Social Responsibility Report

FISCAL YEAR 2004 IN REVIEW

5UNITED STATES & CANADAEUROPE (INCLUDING RUSSIA)PERSIAN GULF

BULGARIA
BELGIUM

MOLDOVAITALY

ROMANIASPAIN

RUSSIA

UNITED KINGDOMTURKEYUNITED STATESCANADA
BAHRAINOMAN
QATARUNITED ARAB EMIRATESBRAZILEGYPTCOLOMBIAISRAELPERU

JORDAN
MOROCCOCOSTA RICAKENYA

TUNISIADOMINICAN REPUBLICLESOTHOEL SALVADOR

MADAGASCARGUATEMALA

MAURITIUS

HONDURAS

SOUTH AFRICAMEXICONICARAGUAMEXICO, CENTRAL AMERICA & THE CARIBBEAN

SOUTH AMERICANORTH AFRICA/MIDDLE EAST

SUB-SAHARAN AFRICAREGIONAL BREAKDOWN OF SOURCING COUNTRIESAND SIGNIFICANT GAP INC. SOCIAL RESPONSIBILITY INITIATIVES
CATEGORIES• Ethical Sourcing• Employees• Community Involvement• Environment

GLOBAL• Business Coalition for Capacity Building (BCCB)• Business Leaders Initiative on Human Rights (BLIHR)• MFA Forum• United Nations Global Compact• Gap Inc. employee programs1
BANGLADESH• Dhaka: Water quality pilot program• Dhaka: ILO training program on better working conditions
CAMBODIA• Phnom Penh: Water quality pilot program• Supervisory Skills Capacity Building (SSCB) program• Sewing a Healthy Future partnership with CARE
CANADA• Brampton, ON: Corporate employee volunteerism• Brampton, ON: Gap Foundation grants anddonations• Brampton, ON: Local ofﬁce environmental programs

1 Gap Inc. has programs to

attract, develop, rewardand engage employees
everywhere we dobusiness, including the
major hubs of operations
indicated on this map.

6

CHINA
• Dongguan: Water quality pilot program• Guangzhou: Impactt/HKPC productivity program• Hong Kong: Corporate employee volunteerism• Hong Kong: Gap Foundation grants and donations• Hong Kong: Local ofﬁce environmental programs• Shanghai: Impactt/HKPC productivity program• Tianjin: Water quality pilot program• Worker trainings on labor law conducted by Mingyu ChenGAP INC. SOURCING AND INITIATIVESCOSTA RICA
• San Jose: Continuous Improvement in the Central
American Workplace (CIMCAW)DOMINICAN REPUBLIC• Santo Domingo: CIMCAW
EGYPT• Cairo: Water quality pilot program• Port Said: Water quality pilot program
EL SALVADOR• San Salvador: Independent Monitoring by Grupo deMonitoreo Independiente de El Salvador (GMIES)• San Salvador: CIMCAWGUATEMALA• Guatemala City: Independent Monitoring by theCommission for the Veriﬁcation of Corporate Codes ofConduct (COVERCO)• Guatemala City: Continuous Improvement in the
Guatemalan Workplace (CIMGUAW)• Guatemala City: Water quality pilot program
HONDURAS• San Pedro Sula: Community Corps volunteers• San Pedro Sula: Gap Foundation grants and donations• San Pedro Sula: Independent Monitoring by the
Independent Monitoring Team of Honduras (EMIH)• Tegucigalpa: CIMCAWEUROPE (INCLUDING RUSSIA)

GREATER CHINANORTH ASIA

CHINA
HONG KONG
MACAU
SAIPAN/N. MARIANAS (U.S.)
TAIWAN (R.O.C.)

SOUTH KOREA

BRUNEI DARUSSALAM
CAMBODIAINDONESIA
MALAYSIAPHILIPPINESBANGLADESH

SINGAPORE

INDIA

THAILANDNEPAL

VIETNAMPAKISTANSRI LANKA

INDIAN SUB-CONTINENT

INDIA• Bangalore: Rainwater harvesting program• Bangalore: Water quality pilot program• Chennai: Water quality pilot program• Delhi: ETI working group on homeworkers• Delhi: National Productivity Council of India
productivity program• Delhi: Project Swabhiman• Gap Foundation grants for tsunami relief
INDONESIA• Sukoharjo: Water quality pilot program• West Java: Water quality pilot program• Gap Foundation grants for tsunami relief
LESOTHO• Maseru: Partnership with CARE on HIV/AIDS• Maseru: Global Training Partnership (GTP)• Maseru: Water quality pilot program
MEXICO• Gomez Palacio: Water quality pilot program• Irapuato: Water quality pilot program• Puebla: Community Corps volunteers• Puebla: Gap Foundation grants and donations
NICARAGUA• Managua: CIMCAWPHILIPPINES• Muntinlupa: Water quality pilot program• Valenzuela: Water quality pilot program
SRI LANKA• Gap Foundation grants for tsunami relief

Gap Inc. 2004 Social Responsibility Report

SOUTHEAST ASIA

THAILAND• Bangkok: Global Compliance Annual Conference training
TURKEY• Istanbul: Bi-Coastals management systems training• Istanbul: Corporate employee volunteerism• Istanbul: Gap Foundation grants and donations• Joint Initiative on Corporate Accountability and Workers’
RightsUNITED KINGDOM• London: Ethical Trading Initiative (ETI)• London: ETI working groups on purchasing practices andhomeworkers• London: November 2004 multi-stakeholder meeting• London: Corporate employee volunteerism• London: Gap Foundation grants and donations• Rugby: Corporate employee volunteerism• Rugby: Gap Foundation grants and donations
UNITED STATES• Community involvement in the U.S. includes employee
volunteerism and Gap Foundation grants and donations• Environmental programs at corporate campuses• Public Reporting Working Group• Albuquerque, NM: Community Corps volunteers• Denver, CO: Colorado in Action• Denver, CO: Gap Foundation grants and donations• San Francisco, CA: BSR Apparel Water Quality Working
Group• New York, NY: Social Accountability International (SAI)• Washington, D.C.: September 2004 multi-stakeholder
meetingGAP INC. SOURCING AND INITIATIVES

7

forging sustainable
solutions

As we prepared this report, we had a chance to reﬂect
on how much has changed since we started working
to improve garment factory conditions more than adecade ago.

Our Approach to Creating
Lasting Change

For most of the 1990s, we concentrated on policing
our manufacturers. We developed our own set ofdetailed labor standards and created an internal teamto enforce them.

The magnitude and complexityof the challenges we facestrategy to improve working conditions in the garment

are not an excuse for inaction.

99.9 percent of the factories that we approved for pro-

We recognize and embrace ourduction for all 12 months of ﬁscal year 2004. And they

responsibility to take a leadership

ating practices and take corrective action on thou-role in improving conditionsin the world’s garment factories.
Photo:
Executive Vice President,
Chief Compliance Ofﬁcer
and General Counsel, Lauri
Shanahan, with Vice President, Social Responsibility,
Dan Henkle.

8

Today, factory monitoring remains a vital part of our

FORGING SUSTAINABLE SOLUTIONS INTRODUCTION

industry. Our Vendor Compliance Ofﬁcers (VCOs) visitedpartnered with factory management to improve opersands of violations of our published labor standards.
Over time, though, we’ve come to realize that monitoring is not enough. Factory inspections make it possible
for us to identify problems and measure progressagainst goals. But ultimately, driving lasting, meaningful change across the industry as a whole requires
a broader, more integrated approach.

In part, that’s because our industry is so large and

FORGING SUSTAINABLE SOLUTIONS

fragmented. As big as we are, we account for justThe magnitude and complexity of the challenges wea small fraction of garment production worldwide.

face are not an excuse for inaction. As we emphasized

We don’t send teams to monitor the many factories

in last year’s report, we recognize and embrace ourwhere we don’t have production. And even in factories

responsibility to take a leadership role in improving

where we do have orders, enforcing our Code of Ven-

conditions in the world’s garment factories. The

dor Conduct (COVC) can be difﬁcult. In most cases, werealities of our industry and broader operating environ-

are just one of several customers, and it’s often fairly

ment, however, do have important implications foreasy for garment manufacturers to replace us if wethe strategies we use to drive change.

revoke approval and walk away.
Over the past few years, we have been migrating

ROOT CAUSES OF
POOR WORKING CONDITIONS

toward a more collaborative, integrated approach in

The bigger problem, though, is that the root causes ofcivil society, trade unions and the commercial sector

poor working conditions are so varied and complex.

to develop broad solutions that address the underly-

As the table below illustrates, problems with labor

ing causes of poor working conditions and stand thestandards can result from a wide range of factors

test of time.

which we work closely with partners in government,that are hard to isolate and address.
Our strategy for forging sustainable solutions focuses
Even the most conscientious garment manufacturers

on four key priorities:

can inadvertently contribute to problems throughweak management skills, outdated operations or a

Inspect & Measuretendency to take on too much work. Buyers like us

We are leveraging both our experience and thecan have a negative impact on working conditions

expertise of external parties to make our monitoring

through inefﬁcient purchasing practices or unreason-

program a more effective tool for identifying problems

able demands. And underlying everything are

and measuring progress. We want to be able to bringsystemic problems – like economic underdevelop-

the same rigor and consistency to factory monitoring

ment and a lack of law enforcement – that put

that we apply to other aspects of our business, likeconstant pressure on wages and chronically under-

tracking inventory ﬂow or recording ﬁnancial results.

mine efforts to protect the rights of workers.

FACTORS CONTRIBUTING TO POOR WORKING CONDITIONS IN GARMENT FACTORIESWORKING CONDITIONSGARMENTMANUFACTURERS

BUYERS (BRANDS ANDRETAILERS)INDUSTRY CONDITIONSCOUNTRY CONDITIONSINTERNATIONALCONDITIONS• Poor supervisory andmanagement skills• Unreasonable expectations regarding speed
and cost• Fragmented nature ofgarment industry• Inadequate or outdated
labor laws

• Intense competition
and focus on reducing
costs• Insufﬁcient enforcement by local government• Global trading requirements, including
complex bi- and multilateral restrictions• Tariffs• Lack of uniform codeand industry coordination and resolve• Lack of understanding of rights among
workers• Geographic shifts in
production following
expiration of quotas• Chronic price deﬂation• Poor economic,
ﬁnancial and civic
infrastructure• Increasing expectations of consumers
regarding cost andselection• Acceptance of orders
without assessing
requisite capacity andcapabilities• Lack of modern technology and equipment• Inefﬁcient processes
and operating practices• Insufﬁcient understanding of labor laws
and standards• Lack of regard for therights of workers• Lack of understandingof factory conditions
and how business decisions impact them
• Inefﬁcient purchasing
practices• Insufﬁcient emphasison labor standards insourcing decisions• Inconsistent labor
standards and meansof enforcement among
companies

Gap Inc. 2004 Social Responsibility Report

INTRODUCTION FORGING SUSTAINABLE SOLUTIONS

9

Last year, we took an important step toward that

Collaborate

goal when Social Accountability International (SAI)

We continue to partner with stakeholders from all

and Verité conducted thorough assessments of oursectors to address the systemic problems thatmonitoring program and inspection protocols. We’recontribute to poor working conditions in our industry.

already good at catching most violations. But theirinsights are helping us dive beneath the surface toOver the past few years, we've worked closely

identify serious problems that are harder to detectwith governments, NGOs, trade unions, other brands– like discrimination, harassment, abuse and viola-and retailers, and garment manufacturers on

tions of the right to freedom of association. Better

dozens of pilot programs in areas ranging frommonitoring data will give us a more accurate picture

worker education and independent monitoring toof working conditions, which, over time, will help

management training and productivity enhancement.

us make more informed sourcing decisions, provide
better guidance to our manufacturers and track

Going forward, we will continue to participate in

improvement more effectively.

localized pilots that target speciﬁc issues. We will
also begin placing more emphasis on leveraging

Integrate

lessons and relationships from these programs to

We are hoping to facilitate better compliance by

support large-scale initiatives that help create theimproving supply chain operations and embedding

legal, economic, civic and regulatory frameworks

labor standards directly into our business practices.

necessary for sustainable change across our

Ultimately, we believe garment manufacturers, mostThree of our most important priorities include:of whom are multi-national corporations in their own

encouraging the development and implementation ofright, must take ownership of and responsibility fora uniform code of conduct and consistent standards ofconditions in the factories they own and operate. To

enforcement; supporting public policy that promotes

encourage them to take that responsibility seriously,

economic development and the enforcement of labor

we’re developing a formal tool that will enable us tolaws; and helping to mitigate the impact of post-

factor in a garment manufacturer’s compliancequota consolidation.

sourcing markets and the industry as a whole.

record – along with criteria like cost, speed, quality
and innovation – when deciding where to place orders.

FORGING SUSTAINABLE SOLUTIONSAt the same time, we recognize that our businesspractices can have an impact on compliance, and we• Inspect & Measure: Make monitoring a moreare actively exploring better ways to work with oureffective tool for identifying problems, managing

manufacturers. To avoid contributing to excessive

remediation and measuring progress

overtime, we’re making a greater effort to ensurethat garment manufacturers have accurately
assessed their capacity and capabilities before we• Integrate: Embed compliance directly intobusiness practices and supply chain operations

place orders with them. We are working to reduce
inefﬁcient purchasing practices such as rush orders• Collaborate: Work with external stakeholders

and last minute changes. And we are continuing toto address systemic issues that have made poor

partner with garment manufacturers to help themworking conditions endemic in the garment

increase productivity and improve complianceindustrythrough better processes and more sophisticatedmanagement techniques.

• Communicate: Build a foundation for ongoinggrowth and collaboration through transparency
and stakeholder engagement

10

FORGING SUSTAINABLE SOLUTIONS INTRODUCTION

Communicate

We’ll be holding ourselves accountable for these goals

We are concentrating on building a strong foundation

as we move forward. We invite you to do the samefor continued growth and collaboration throughby sharing your questions and comments with us

greater transparency around our business practices,

through our corporate web site at www.gapinc.com.

our goals and the challenges we face.
To quote U.S. Supreme Court Justice Louis Brandeis,
we believe that a “bright light is the best disinfectant.”
The more open and honest we can be about conditions
and challenges, the more helpful we can be in

Lauri M. Shanahan, Executive Vice President,

addressing them.

Chief Compliance Ofﬁcer and General Counsel

This report and the one we released last year are
reﬂections of that belief. But we know it is essential tocommunicate and learn on a continuous basis.
Dan Henkle, Vice President, Social Responsibility
You’ll see examples of this commitment throughout
the pages that follow. On page 52, for instance,
members of the Public Reporting Working Group, who
encouraged us to release last year’s report, sharesome of their thoughts on this report. On page 36, wediscuss learnings from stakeholder outreach sessions
we conducted last year in Washington, D.C. and
London. And on page 37, we describe some of thework we are doing with the Global Reporting Initiative(GRI) to develop consistent reporting standards thatwill make it possible to compare performance acrosscompanies and over time.

THE ROAD AHEAD
As signatories to the United Nations Global Compact,
we are commited to ensuring that all aspects ofour business are conducted with respect for humanrights. The more we work to improve labor conditions,the further we realize we have to go. But by improving
our ability to identify violations, embedding labor
standards directly into our business practices andpartnering effectively with stakeholders to address
systemic problems, we believe we can help drive
lasting change not only in our approved factories but
across the entire garment industry.
The table on the next page provides a summary of ourprogress over the past year. On the opposite page, weoutline our key goals through 2006.

Gap Inc. 2004 Social Responsibility Report

INTRODUCTION FORGING SUSTAINABLE SOLUTIONS

11

2004 GOALS
AREA OF FOCUS

GOAL

PROGRESSSELF-ASSESSMENT

Inspect & MeasureParticipate in SAI pilot
compliance program
evaluation• Participated in evaluation by Social Accountability Interna-

Achieved

Identify supply chain
practices that may
impact factory working
conditions• Identiﬁed inefﬁcient purchasing practices and launched pilot

Integratetional (SAI) (p.26)• Participated in Verité assessment of training needs (p. 27)

Achieved

programs to drive improvement (p. 32)• Began developing sourcing scorecard that integrates

compliance data into sourcing decisions (p. 30)• Began developing a production scorecard for garment

manufacturers to evaluate and provide feedback on ourbusiness practices (p. 33)• Held Vendor Summit to begin building closer relationships

and set expectations among top garment manufacturers (p. 29)• Expanded efforts to help our garment manufacturers

improve management and operating practices (p. 31)
Collaborate

Support multistakeholder efforts todevelop uniform codeof conduct• Began efforts to reconcile Gap Inc.’s Code of Vendor
Conduct (COVC) with Ethical Trading Initiative (ETI) and SAI
standards (p. 38)

In progress• Participated in multi-brand group to align practices in India• Participated in Joint Initiative on Corporate Accountability
and Workers’ Rights (p. 38)

Broaden worldwide
stakeholder engagement and initiatives• Participated in several key multi-stakeholder initiatives(MSIs), including ETI, the Business Leaders Initiative on
Human Rights (BLIHR) and the MFA Forum (p. 37)

Achieved• Continued collaborative efforts with the International Labor
Organization (ILO) and other organizations in Cambodia,
including a new program with the Mekong Private Sector
Development Facility to train factory supervisors (p. 41)• Helped launch two capacity-building and social dialogue
programs in Central America – Continuous Improvementin the Guatemalan Workplace (CIMGUAW) and Continuous
Improvement in the Central American Workplace (CIMCAW)(p. 40)• Continued participation in the Business Coalition for
Capacity Building (BCCB) (p. 40)• Invited AccountAbility to conduct training for compliancemanagement team to develop better stakeholder engagement skills based on the AA1000S standard
Communicate

Not stated in lastyear’s report• Published ﬁrst social responsibility report• Hosted stakeholder outreach sessions in the U.S. and U.K.
(p. 36)• Increased participation in forums related to social
responsibility and factory conditions• Continued ongoing dialogue with individual stakeholders toshare learnings, identify issues and develop strategies

12

FORGING SUSTAINABLE SOLUTIONS GOALS

Achieved2005–06 GOALS
AREA OF FOCUS

GOAL

ACTION PLAN

Inspect & Measure

Review COVC to address deﬁciencies and increase alignment withother codes• Conduct a comparative analysis with the SA8000 standard and ETI Base Code

Review monitoring protocol for
more efﬁcient and effective use ofcompliance resources• Evaluate scope, duration, stafﬁng levels and frequency of factory audits in• Outline plan to address major inconsistencies

context of feedback from SAI and Verité• Evaluate opportunities to streamline monitoring efforts through greatercollaboration with other buyers and third-party auditors
Develop a new data collection
system• Develop system that substantially improves ability to record, analyze andFurther enhance external auditor
training for compliance team

• Identify externally-recognized training organizations

report data in meaningful ways

• Conduct additional issue-speciﬁc training on detection of issues such as

discrimination and freedom of association
Integrate

Collaborate

Integrate compliance performance
metrics into sourcing scorecard• Work with sourcing to include compliance performance as a factor in overall

Develop formal internal training toaddress purchasing practices issues• Conduct business simulation training that highlights the impact ofExplore options for a more systematic training program for garment
manufacturers and factories• Identify training opportunities

Determine how to utilize recommendations of MFA Forum• Develop strategy to guide responsible decision-making in post-quota

Help develop standardized indicators for monitoring and reporting in
the apparel and footwear industry• Continue support for the Joint Initiative on Corporate Accountability andfactory ratingspurchasing decisions on compliance, quality and cost

• Expand vendor ownership program to additional factories

environment
Workers’ Rights and explore other opportunities to accelerate and expand
reach of work
• Participate in the Global Reporting Initiative’s (GRI) working group to

develop an apparel and footwear sector supplement

Communicate

Inﬂuence expansion of programs
that lead to sustainable improvements in factory working conditions• Inﬂuence garment manufacturers to implement factory improvement

Improve ability to bring issues tothe surface through strengtheningof stakeholder engagement at the
local level• Continue developing expertise of compliance management team on

Develop deeper understanding of
homeworker challenges• Continue participating in the ETI working group on homeworkers

Increase transparency into Gap Inc.
business practices• Evaluate reporting strategy to ensure that communication is meaningful toprograms• Explore opportunities to expand Cambodia ILO model to other countries

stakeholder engagement and capacity building• Identify local organizations with capacity to deliver factory-based training

and MFA Forum-related work

stakeholders and provided at appropriate intervals• Continue efforts to develop metrics that can be used to compare

performance over time
Expand understanding of industry
issues and stakeholder priorities• Continue stakeholder outreach sessions• Link local stakeholders to relevant global organizations to facilitate acoordinated approach to engagement at all levels

Gap Inc. 2004 Social Responsibility Report

GOALS FORGING SUSTAINABLE SOLUTIONS

13

The Art of Factory Monitoring
We believe that “what gets measured gets managed.”
Despite its imperfections, monitoring data is an important
tool to help us assess our performance, understand factory
conditions and improve our efforts over time.
Factory monitoring remains a key element of our

The lack of consistent standards and enforcement

efforts to improve working conditions in the apparelmechanisms in our industry makes it virtuallyindustry. On-site inspections give us ﬁrst-hand insight

impossible to compare performance over time andinto whether factories are adhering to the labor,

across companies in a meaningful way. Just as

health and safety standards in our Code of Vendor

Generally Accepted Accounting Principles (GAAP)

Conduct (COVC). This helps us measure performance,

took decades to evolve, we expect it will be years

guide improvement and shape our long-term strategy.

before the garment industry adopts a standardized
approach to tracking, evaluating and reporting on

Getting an accurate picture of factory conditions,factory compliance.

however, is more difﬁcult than it seems. In many
ways, monitoring is more art than science.

Still, we believe that “what gets measured gets

A number of variables – ranging from the complexity

managed.” Despite its imperfections, monitoringof a violation to the level of trust among workers – candata is an important tool to help us assess ouraffect results. Nearly a decade after we formed our

performance, understand factory conditions andGlobal Compliance department, we are still exploring

improve our efforts over time.

ways to better capture and measure the impact of ourmonitoring program.

14

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORINGDEVELOPING EFFECTIVE MONITORING

2004 FULL-TIME GLOBAL COMPLIANCE EMPLOYEES#off
Co ullm tim
plia e G
nc lo
e
b
em al
pl
oy
ee
s

Our Global Compliance team ﬁelds more than 90
individuals around the world who are as diverse as
the garment manufacturers from which we source.
Most of them are Vendor Compliance Ofﬁcers, orVCOs. They are the eyes and ears of our monitoring

REGION

program. They spend their days visiting factories,

Greater China

conducting inspections, documenting violations of our

North Asia

5

COVC, and working with garment manufacturers andSoutheast Asia

16

others to build capacity for greater compliance.

Indian Sub-Continent

1216Persian Gulf0

We aim to hire VCOs from the country or communities

North Africa & the Middle East2

in which they work, since local knowledge greatly

Sub-Saharan Africa

4enhances their ability to detect issues and communi-

Europe (including Russia)

6cate with factory managers and workers. To ensure

United States & Canada

21that our VCOs remain objective and focused on

Mexico, Central America & the Caribbean

9

improving working conditions, the Global ComplianceSouth America

1team sits outside of the sourcing organization and

Total

92

1

2

is not responsible for quality assurance or any
other functions.

1 The Persian Gulf region is covered by the Indian Sub-Continent team.
2 Includes corporate headquarters staff based in San Francisco.

In addition to cultural understanding and independence, effective factory monitoring requires skill,

MAKING SENSE OF MONITORING DATA

training and experience.

Differences within the industry
Some compliance violations are simply easier to

Because there is no single monitoring standard inﬁnd than others. For example, it isn’t hard to see if a

the apparel industry, codes of conduct, frequency andfactory has an adequate number of emergency exits on

scope of monitoring, and team training all vary widely

each ﬂoor. On the other hand, it requires much moreacross companies. As a result, monitoring data also

skill and tenacity to determine if factory managers arevaries widely.

deliberately disguising excessive overtime hours withfalse records or worker intimidation.

Highly-skilled compliance monitors naturally ﬁnd
more problems than less-skilled monitors conduct-

A VCO must look beyond the visible evidence in a

ing cursory inspections – even in the same factories.

factory and piece together information from a variety

Large, dedicated teams conducting thousands of in-of sources – including time cards, production records,

spections across a supply chain are likely to ﬁnd more

pay slips, broken needle logs and one-on-one

compliance issues than smaller teams monitoring a

conversations with workers. The more experienced

sampling of factories on a part-time basis. Their data

the VCO, the more information – and violations – he orreports look very different from one another, but theshe is likely to uncover.

difference isn’t necessarily in the factory conditions.
It’s in the amount of information gathered.

Differences among regions
On a smaller scale, we have faced similar challenges
when we compare ﬁndings from our own VCO teams
in different regions.

Gap Inc. 2004 Social Responsibility Report

THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

15

Does this mean that factory conditions are
deteriorating? Or are we simply getting better at ﬁnding existing problems? Similarly, if we see a decreasein the number of issues from one year to the next,
how do we know that factory conditions have really
improved? How can we be sure that we didn’t justmiss something in our inspections?
We addressed this issue in 2004 when we invited SAI
and Verité to conduct external reviews of our program.
SAI examined our management systems and processes and audit planning, while Verité conducted a
program and training needs assessment that included
inspections of our approved facilities and a comparison of their ﬁndings with our own. We then asked both
Sometimes this is due to regional differences in ourgroups to conduct specialized training for our teamsourcing base. Production naturally expands andin October 2004. SAI focused on the complex issues

contracts in different areas at different times. In anyof freedom of association, discrimination and how togiven year, we may approve a signiﬁcant number of

improve factory management systems, while Verité

new factories in one country and experience low turn-demonstrated ways to further improve our monitoringover in another. Since new factories tend to have askills and support our vendor ownership goals.

more limited understanding of our requirements thanestablished factories, the level of turnover in a region

After these training sessions, we saw an increase in

is a signiﬁcant factor in the overall level of compliance.

the number of violations found by our VCOs during
factory visits. Had the factories gotten worse?

In other cases, our VCOs may approach their work

Probably not. More likely, the training helped improveslightly differently from region to region, depending on

our ability to ﬁnd issues.

background, experience, and the political, economic,
and social context in different countries. We main-

IMPROVING MONITORING DATA

tain global policies and procedures that limit these

Assessing factory performance over time is one ofdifferences, but at the same time, we must provide

the most difﬁcult tasks we face. Nevertheless, there

ﬂexibility to accommodate local needs and priori-

are concrete steps we can take to reﬁne and interpretties. In 2004, we noticed some regional variations inmonitoring data to give us meaningful insight into ourour monitoring and factory rating data that appeared

performance and impact at the factory level.

to stem more from divergent team procedures thanactual conditions on the ground. In 2005, we will be

In the absence of standardized monitoring protocols

working to improve our global monitoring procedures

and training at the industry level, we can continue toto reduce these differences.

standardize and improve our own internal policies andprocedures. We can reduce differences in how ourDifferences from year to year

own country and regional teams do their jobs and in-

Just as we ﬁnd differences between regions, we also

troduce global training to reinforce the same baseline

face challenges when we try to compare our global

approach for everyone. We can also continue to seek

data from year to year. As our VCOs gain more

external veriﬁcation to ensure that we remain aligned

experience, they are often able to uncover morewith leading practices and perform to high standards.

compliance violations. As a result, we’ve seen the
total number of issues we ﬁnd increase over time.

16

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORINGWe can also look at progress in different ways and

IN HER OWN WORDS

recognize that it will occur at different rates – depend-

Jyotsna Belliappa

ing on the type of violation, the factory and the country.
When we released our ﬁrst report, many readers wereGrowing up in India in the last decade has been exciting.

surprised by all the problems in garment factories.

India is in the throes of change. The old order is changing,

We know change is possible, but it is likely to occur in

but the new order is not yet in place.

stages and over time.
In 1999, my decision to become a Vendor ComplianceIn the near term, progress is likely to mean that we

Ofﬁcer at Gap Inc. pulled me into this whirl of change.

ﬁnd more violations, not less, especially in challenging
areas such as discrimination and freedom of associa-

Although I had worked previously with women’s issues and sustainable com-tion. We hope that, as we work with fewer garment

munity development on coffee plantations, I found the practices in the garment

manufacturers for longer periods of time, these num-industry in urban Bangalore totally perplexing. It was difﬁcult to understandbers will begin to level off and, eventually, decrease.

why a vendor would resort to excessive overtime when it ate into his proﬁts.
Why would a supervisor scream at a worker who was so critical to production?

ASSESSING OUR MONITORING EFFORTS:
HOW DID WE DO IN 2004?

Why did administrators waste time maintaining false sets of records when it
was simpler to maintain transparent records?

Setting a bar for entry

My questioning of the industry brought one consistent but unsatisfying answer –Last year, we continued to require that all garment“industrial practice.” I realized that industrial practice had become a comfortablemanufacturers and subcontractors pass our approval

refuge. When you’re comfortable, you don’t like to change or ask questions.

process before we placed any orders. This process,discussed in detail in our 2003 report, can take any-

When, as a VCO, I demanded change, I was considered a troublemaker. I was

where from a week to more than a year to complete.

told that if we stopped overtime, workers would strike because they needed the

No garment production can be placed until the Global

extra money. I was told that screaming was necessary because it was the only

Compliance team has signed off.

language that workers understood. And so on.

Our 2004 approval rate was similar to our approval

Yet over time, as I have shared Gap Inc.’s ethical sourcing principles with ourrate in 2003. We rejected 15 percent of the newpartners in South India, I have witnessed steady, albeit slow, change. Experience

factories we evaluated, compared with 16 percent in

is proving that better planning reduces the need for overtime, and more efﬁcient

2003, and evaluated 199 fewer new factories. Because

production processes give workers the opportunity to earn more in fewer hours.

the elimination of textile quotas earlier this year is al-

When workers are being paid according to the law, there is no need to keep

lowing us to keep more of our production in currently

different sets of records. As workers see these changes, they reciprocate withapproved factories, we had less need to bring new

fewer grievances against management, greater motivation and increased quality

factories on line in 2004. For further information onof production.

the impact of post-quota consolidation on our manufacturing base, please see page 28.

We are beginning to see a paradigm shift in the deﬁnition of “industrial
practice” in India. There is still much to learn and change. Yet every time a bestpractice becomes a common practice, I know it’s a small victory. Slowly but
surely, the concept of “compliance” is evolving into the possibility of corporatesocial responsibility.

Jyotsna Belliappa is the Gap Inc. Vendor Compliance Manager for South India.

Gap Inc. 2004 Social Responsibility Report

THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

17

2004 FACTORY APPROVAL DATA

What do these numbers mean?
We still face many challenges with our approvededt at
en aludrm evve
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#
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factories. However, our approval process does havea measurable impact on factory compliance levels.
Approved factories tend to have fewer overall compliance issues than factories that have not yet gone

REGIONthrough the process. The only violation we ﬁnd more

Greater China

93

68%

26%

frequently in approved factories is related to ourNorth Asia

11

91

9

0

overtime policy, and this is due to the fact that we haveSoutheast Asia

75

78

7

15

the opportunity to review factory records for longer

Indian Sub-Continent

64

87

8

5

periods of time and during peak production cycles.

Persian Gulf

1

100

0

0

Monitoring our approved factory baseOnce a garment factory is approved, we aim to visit itat least once a year. For some, we conduct more
visits. In 2004, our VCOs conducted approximately
6,750 inspections in 2,672 garment factories aroundthe world. This is a decrease of about 1,750 inspections and 337 factories compared to 2003, due primarily to consolidation in our manufacturing base.

6%

North Africa& the Middle East

30

73

13

14

Sub-Saharan Africa

21

62

29

9

Europe (including Russia)

57

70

21

9

United States & Canada

20

80

5

15

Mexico, Central America& the Caribbean

68

88

9

3

South America

14

64

29

7

Total

454

77%

15%

8%

2004 DOCUMENTED COMPLIANCE VIOLATIONS: NEW FACTORIES VS. APPROVED FACTORIES
Violation Categories:
General Principle
Environment

Discrimination
Forced Labor

Child Labor
Wages & Hours

Working Conditions
Freedom of Association

50%

40%

30%

20%

10%

New Factories

18

Approved Factories

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORING

VIIIA

For a detailed explanation of each type of violation, see pp. 22-23.

VIIIB

VIIQ

VIIP

VIIO

VIIM

VIIN

VIIL

VIIK

VIIJ

VIII

VIIH

VIIG

VIIF

VIIE

VIID

VIIC

VIIA

VIIB

VIG

VIE

VIF

VID

VIC

VIB

VIA

VD

VC

VA

VB

IVB

IVA

IIIB

IIB

IIIA

IIA

IB

IA

0%

In 2004, we inspected 99.9 percent of the garment

2004 FACTORY MONITORING DATA

factory managers to help resolve compliance issues,

Greater China

219

100%

facilitate worker and management training sessions,North Asia

64

100

percent of factories approved for less than 12 months.
4 percent, respectively, over 2003. In addition, our
VCOs held approximately 1,300 other meetings withor review the policy and procedures of our program.

Southeast Asia
Indian Sub-Continent

Going forward, we expect the total number of

Persian Gulf

inspections to continue to decrease. This is both

North Africa& the Middle East

because we anticipate more consolidation in
our manufacturing base and because we plan to
redeﬁne our monitoring protocols to allow for longer
inspections at larger factories.
In the post-quota world, garment factories will probably increase in size to take advantage of economies
of scale. Many will employ thousands of workers.
In this new context, our monitoring program will be
more effective with fewer, but longer, inspections ineach factory – a practice conﬁrmed by the recommendations of SAI and Verité. Dedicating more people
and more time to each of our inspections will give us

Sub-Saharan Africa
Europe (including Russia)
United States & Canada
Mexico, Central America& the Caribbean
South America

APPROVED FOR ALL OF FY2004

This was an increase of approximately 6 percent and

350

99.7

299

100

18

100

30

100

53

100

91

98.9

33

100

87

100

34

100

1,278

99.9%1APPROVED FOR ALL OR PART OF FY2004REGION

s
s
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rie
rie
to
to
ite
ite
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is
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rm
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#
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factories approved for all of ﬁscal year 2004, and 90.4

423

97.9%

138

82.6

603

94.5

525

90.9

29

89.7

92

83.7

103

91.3

257

81.3

151

76.2

280

91.1

71
2,672

93.0
90.4%

1 Two approved factories did not receive an evaluation in 2004. One, located in thePhilippines, experienced a meningitis outbreak that forced our VCO to postpone his
inspection until it was safe to enter the factory. The other, in Belgium, is the only
approved factory in that country and serves primarily as a center for distribution ofmerchandise to our retail stores. The facility has a small sewing section for the repairof defective products found in shipments from other factories but does not
manufacture any garments directly.

a more detailed picture of factory conditions.
This will also help us identify the root causes of

Changes in our manufacturing baseviolations and devote more time to remediating them.

The factories in our base continued to shift from

We anticipate that this decrease in the number of2003 to 2004. We approved 349 new factories in 2004.

inspections will be complemented by an increase inSince new factories tend to have less knowledge ofthe number of other meetings and training sessions

our compliance expectations than establishedthat VCOs hold with factory managers and workers.

factories, they are more likely to have compliance

These sessions, in which we often partner with exter-

problems, especially in basic health and safety areas.

nal groups to provide training, help factory managers
understand how to ﬁx problems more effectively andprevent them from recurring. As their understanding
grows, we will expect manufacturers to assume more
responsibility for their own business practices.

ASSESSING FACTORIES:WHAT DOES PROGRESS LOOK LIKE?
We did not see signiﬁcant changes in overall factorycompliance levels from 2003 to 2004. In fact, we would
have been surprised if we had, given the ongoingchanges in our supply base, new program procedures
and the fact that remediation simply takes time.

Gap Inc. 2004 Social Responsibility Report

THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

19

Notably, we also saw small increases in our documentation of factories with cases of discrimination. In part,
this demonstrates what our team learned from the SAI
training sessions in October 2004. Nonetheless, we
continue to believe that these violations, and those of
freedom of association, are more widespread than ourdata suggest. Many of these issues ﬁrst come to ourattention through third parties, such as trade unions orNGOs, rather than our own monitoring efforts. We
plan to introduce more targeted training to improve
our work in these areas in the future, and explore ways
to integrate trade union and NGO insights more
systematically into our monitoring processes.

Better documentation procedures

Remediation takes time

We modiﬁed our internal policies and procedures on

Another reason we did not see signiﬁcant changes

documentation in 2004. It isn’t always easy for VCOs

from 2003 to 2004 is that the most difﬁcult compli-

to determine how to categorize a speciﬁc factoryance violations take time to resolve. Many cannot be

issue. For example, when a factory fails to pay theremediated through the monitoring process in ways

minimum legal wage to workers, this violates boththat address their root causes and prevent them fromlocal law (Section IA of our COVC) and our minimum

happening again. To see lasting improvements, wewage requirement (Section VIA of our COVC). In 2003,

have to supplement our monitoring with more train-

we discovered that VCOs were sometimes classify-

ing and development opportunities; help manage-ing issues as violations of local law when they could

ment develop more efﬁcient production processes

be classiﬁed more speciﬁcally elsewhere. Last year,

and better supervisory skills; and help workers learn

we took time to clarify our internal policy, noting that

how to assert their rights and seek recourse when

all violations should be documented under the mostproblems arise. We would also like to encourage

precise COVC requirement available. As a result, wemanufacturers to invest in new and better technolo-

saw a 5.5 percent global decrease in the number ofgies that will improve factory productivity without

local law violations, with corresponding increases instraining worker capacity.

other areas (in particular, Section VIIC on local laws
on working conditions).

Although we have been monitoring for several years,
we are still in the early stages of this more compre-

External training on monitoring skills

hensive approach to remediation. Later in this report,

As mentioned earlier, we underwent external assess-

we share some of what we have learned from pilot

ments by SAI and Verité. We asked them to review

projects and collaborative initiatives. Ultimately,

our overall program and help our team better detect

we hope to use this work with external partners tocompliance violations – especially those related tocomplement our monitoring – not only to continue

discrimination and freedom of association. As a result,improving our ability to detect issues, but more

our VCOs demonstrated better detection rates in theimportant, to resolve them effectively and prevent

second half of 2004, which resulted in small percent-them from recurring.

age increases in some violation categories.

20

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORING

2004 CODE VIOLATIONSREGION1

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No. of approved factories in 2004

423

138

603

525

29

92

103

257

151

280

71

No. of factories revoked for compliance violations

18

0

18

23

0

3

6

1

1

0

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GENERAL PRINCIPLE
IA

Lacks full compliance with local laws

IB

Restricted access of Gap Inc. representatives

ENVIRONMENT
IIA Lack of environmental management system or plan
IIB Insufficient notification procedures in case ofenvironmental emergency
DISCRIMINATION2
IIIA Employment
IIIB Wages & benefits
FORCED LABORIVA Use of involuntary labor
IVB For foreign contract workers, non-payment of agency
recruitment fees and/or requiring workers to remain in
employment against their will
CHILD LABOR
VA Workers are not 14 years old or do not meet
minimum legal age requirement
VB Not in full compliance with child labor laws
VC Failure to allow eligible workers to attend night classes
and/or participate in educational programs
VD Poor age documentation
WAGES & HOURS
VIA Pay is below minimum wage
VIB Overtime rates are below legal minimum
VIC Work week in excess of 60 hours
VID Workers cannot refuse overtime without
threat of penalty or punishment
VIE Workers do not have at least 1 day off in 7
VIF Violation of local laws on annual leave and/or holidays
VIG Unclear wage statements

LEGEND
No code violations veriﬁed
Violations veriﬁed in less than 1% of factories
Violations veriﬁed in between 1% and less than 10% of factories
Violations veriﬁed in between 10% and less than 25% of factories
Violations veriﬁed in between 25% and less than 50% of factories
Violations veriﬁed in more than 50% of factories

The size and scope of this chart preclude a thorough analysis of
issues in all regions. However, the following discussion highlights
some of our key findings in 2004.

22

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORINGSECTION IV – FORCED LABOR
We found one instance in 2004 in which workers in a Chinese
factory were not permitted to resign (if they so desired) during thepeak production season. We revoked approval of the factory.
We also found a case in Honduras where the doors in one
production area were locked, thus preventing workers frombeing able to leave. We asked the factory to correct the situation
immediately and confirmed a few weeks later through a physicalinspection and interviews with workers that the doors were andhad remained unlocked. We continue to monitor the factory.
We recorded three cases in Egypt, Morocco and Vietnam,
respectively, in which factories maintained a clause in theiremployment contracts requiring workers to pay a fee if they
resigned before the contract ended. In each of the three cases,
we required the factories to remove this clause and followed up in
subsequent visits to confirm that it had been deleted.

a
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WORKING CONDITIONSVIIA Physical punishment or coercion
VIIB Psychological coercion and/or verbal abuse
VIIC Violation of local laws on working conditions
VIID Insufficient lighting
VIIE Poor ventilation
VIIF Insufficient or poorly marked exits
VIIG Obstructed aisles, exits or stairwells
VIIH Locked or inaccessible doors and exits
VIII Insufficient number of and/or inadequately
maintained fire extinguishers
VIIJ Insufficient number of fire alarms and/or
emergency lights
VIIK Not enough evacuation drills
VIIL Machinery lacks some operational safety devices
VIIM Inadequate personal protective equipment
VIIN Insufficient access to potable water
VIIO Inadequate first-aid kits
VIIP Unsanitary toilets and/or restricted access
VIIQ Inadequate storage of hazardous and combustible
materials
FREEDOM OF ASSOCIATION2
VIIIA Workers are not free to choose whether or not tolawfully organize and join associations
VIIIB Penalization or interference with workers’ lawful
efforts to organize

SECTION V – CHILD LABOR
Last year, we uncovered three cases in China in which workers had
been hired just before they turned 16 years old, which is the legal
working age in China. We revoked approval of all three factories.
We also observed a relatively high occurrence of problems withage documentation in China. While most of these violations wererelatively minor, such as a missing photo in a personnel record, we
continue to monitor this issue vigilantly and will investigate further
if we suspect any falsification of documents.
REGIONAL ISSUES
China
Freedom of association is an especially complicated issue in
the Chinese legal context. We recognize that Chinese workers,
like all workers, have an important voice that needs to be heardby management in a regular and consistent way. Chinese law,however, stipulates that workers may organize only under theumbrella of the government-sponsored trade union. We are
currently examining ways in which we can facilitate lawful“parallel means” to free association in China in order to provide
workers with the opportunity and means to raise concerns andseek solutions without the fear of repercussions. We have begun
taking small steps in a few Chinese factories to facilitate theformation of worker committees around health and safety issues
and recreational activities.

Gap Inc. 2004 Social Responsibility Report

Persian Gulf
We saw a significant increase last year in overtime violations byfactories in the Persian Gulf. We believe this was due in large partto production pressures stemming from fabric delays, as well
as shifts related to quota requirements. The factories corrected
the problems upon our request. However, we will monitor thissituation closely in 2005.
South America
We saw a notable increase in several categories of violations inSouth America. This region experienced significant growth inproduction last year and was one of only two regions worldwide
where the number of approved factories increased in 2004. Mostof the violations involved health and safety issues, such as blocked
aisles, missing exit signs and a lack of machinery safety devices.
These types of issues tend to be more common in facilities thathave been approved for shorter periods of time. We are continuing
our work with our South American manufacturers to help thembetter understand our requirements with the expectation that they
will demonstrate improved performance over time.

1

The map on pp. 6-7 provides a breakdown of sourcing
countries in each region.

2

We believe that violations in these areas are morewidespread than our data suggest. For more information, please see p. 20.
THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

23

CHANGE IN % OF FACTORIES WITH DOCUMENTED CODE VIOLATIONS BY TYPE

Percent change 2004 vs. 2003
Violations:
General Principle
Environment
Discrimination
Forced Labor
Child Labor
Wages & Hours
Working Conditions
Freedom of Association
For a detailed explanation of each type of violation, see pp. 22-23.

FACTORY PERFORMANCE IN 2004
We noted in 2003 that few factories, if any, are in full

The chart on the next two pages illustrates thecompliance all of the time. Our goal is to work withfrequency of code violations documented by our VCOs

factory managers to ﬁx problems where we ﬁnd themin approved garment factories in 2004.

and work to prevent them from recurring. However,serious or excessive COVC violations sometimes
require us to terminate a business relationship.
Last year, we revoked our approval of 70 factories“Our experience tells us that the most responsible
companies can be the ones that report a rise infor compliance violations, about 2.6 percent of ourlabor rights abuses. Rather than the real situation

approved base. This is down from 136 factories,

for workers getting worse, it may be that the brandor 4.5 percent, in 2003.
We attribute this decrease largely to the fact that we

has gotten better at detecting problems. But

uncovered fewer instances of false recordkeeping

diagnosis is only step one. It is more important tolast year. This is a violation that we will not tolerate

see companies reporting corresponding increases

and that has led us to revoke several factory approvals in the past. During the past two years, we havestressed to manufacturers the importance of showing
VCOs true, accurate records. We prefer to work with
manufacturers who are honest about their challenges

in the number of problems that have actually
been resolved.”
Dan Rees, Ethical Trading Initiative (ETI)

rather than those we cannot trust. Since we madeno changes to our detection process, we hope thisdecrease suggests that our words and actions have
had an impact.
Gap Inc. 2004 Social Responsibility Report

THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

21

RATING FACTORIES ON COMPLIANCEPERFORMANCE

We are continuing to work toward the implementation

In last year’s report, we introduced a rating tool thatwill enable us to analyze our monitoring data in aquantiﬁes our inspection data and helps us compare

more sophisticated manner. We hope to reﬁne ourfactory performance from year to year. Factories

rating tool as our technical infrastructure evolves.

of a new tracking and reporting system, which

receive ratings based on the number and type ofissues documented during inspections over a 12-month

CHANGES FROM 2003 TO 2004

period, as well as how often the issues recurred andBecause of differences across countries in local

how long it took factory management to resolve them.

laws, average factory size and cultural comfort levels
with sharing concerns, comparing countries can be

What we learned from the pilot phase

difﬁcult. As such, the following section reviews rating

The pilot phase of this project has been very instruc-changes from 2003 within each country.

tive. Although we apply the same monitoring protocol
globally, we’ve learned that certain regional differ-

Cambodia

ences, such as the number of VCOs conducting an

Ratings in Cambodia were generally stable inaudit, can impact ratings and affect rating distribu-

2004. Of the factories rated in both 2003 and 2004,

tions in different countries.

83 percent either maintained or increased theirratings. Four factories fell back, and just one is

In 2005, we will be evolving our global monitoring

currently rated Level 1.

protocol to incorporate speciﬁc regional needs andaddress recommendations from SAI and Verité. We

Lesothohope this will help reduce variation among countries.

In Lesotho, 90 percent of the factories rated in 2003
either maintained or increased their ratings last year.

2004 FACTORY RATING DATA

Two factories are currently rated Level 1. We are

The following chart shows our 2004 rating data. These

continuing to work with these factories to help

ratings were calculated using the same methodology

them improve their performance.

as those reported in 2003.

El Salvador
In El Salvador, 100 percent of the factories rated in2003 maintained or increased their ratings in 2004.
Two factories, both of which were newly approved

2004 FACTORY RATING DATA
qu
ire
d)

in 2004, are currently rated Level 1.

24

COUNTRY

Le
ve
l

1

(U

rg
e

nt

At
te
nt

io

n

Re

t)
en
m
e
ov
pr
)
nt
Im
le
ds
d)
el
)
e
c
r
o
x
e
o
ai
(E
(G
(N
(F
4
2
3
l5
l
l
l
l
e
e
v
v
ve
ve
ta
Le
Le
Le
To
Le

Cambodia

1

2

9

14

6

32

China

49

51

68

54

14

236

El Salvador

2

0

2

1

5

10

Guatemala

3

4

7

3

0

17

Honduras

3

2

1

5

2

13

Lesotho

2

3

4

3

0

12

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORING

Guatemala and Honduras
In both Guatemala and Honduras, more than halfof the factories rated in 2003 experienced a rating
decline last year. This decline may be due in part tothe fact that we expanded our staff in Central America
and were able to conduct more factory inspections.
However, we are investigating further to determine if
there may have also been a decline in conditions.

ChinaIn China, 51.8 percent of the factories rated in 2003
maintained or increased their ratings in 2004. Of thefactories rated Level 1 in 2003, a majority either
improved their ratings or were removed from ouractive production base last year.
Despite these positive changes, we were concernedby the year-on-year decline of 48.2 percent of the
facilities rated in both 2003 and 2004 in China. We

2004 EXTERNAL PROGRAM ASSESSMENTS

believe this is due to three factors.

Third-party assessments of our work are essential
in helping us identify opportunities for future devel-First, our local VCOs improved the accuracy of theiropment. External stakeholders challenge us with

documentation of issues. Documentation is extremely

different perspectives, set new expectations and holdimportant in the calculation of ratings, since issues

us accountable for results.

receive weightings in the rating formula based on
their relative severity. For example, IA (local law)

In 2004, we fulﬁlled our goal to participate in SAI’s

violations are not considered as serious as otherindependent evaluation of our Global Compliancetypes of violations. In 2003, Greater China had one ofprogram. Respected for its expertise in management

the highest rates of IA violations in the world. Uponsystems, SAI examined our program in its entirety,

analysis, however, we discovered that many of these

conducting interviews with our corporate leadership

violations could have been classiﬁed more accurately

team, reviewing our internal policies and procedures,

under a different COVC item. Last year, the VCO teamand “shadowing” VCOs during factory inspections inin China took steps to improve their approach and list

the ﬁeld. We also asked Verité, an organization known

violations under the most speciﬁc COVC section pos-for its expertise in auditing, training and analysis, tosible. This led to an overall increase in other types ofconduct a focused assessment of our monitoring pro-issues, some of which were weighted more heavily ingram and procedures, including our goals and impact,

the rating formula.

and the training needs of our ﬁeld team. Both evaluations reinforced some of our best practices, such as

Second, our team increased the number of joint

the inclusion of all of our garment manufacturers andinspections in Chinese factories last year. With more

subcontractors within our program’s scope and thepeople in the factory, our ability to ﬁnd violations

experience and enthusiasm of our compliance team.

improved.

They also identiﬁed areas for improvement, such as
the need to restructure our monitoring teams to use

Third, we believe that the number of compliance

their time more efﬁciently and to develop a formal

issues in some areas simply increased. Several areas

training program for our approved garment factories.

in China experienced labor and power shortages last

Each organization provided a summary of its ﬁndings

year, which led to signiﬁcant disruptions in produc-for this report, which appear on pages 26-27.

tion. Because some factories sought to compensate byworking longer hours, we saw more violations of our

We have planned several initiatives for 2005 and 2006

overtime provisions. Since overtime requires factories

that incorporate the recommendations from SAI andto pay workers more, we also saw an increase in wage

Verité. These include reviewing our COVC against

violations. Both of these are serious issues, so themulti-stakeholder codes such as SA8000 and theincreases weighed heavily on factory ratings.

Ethical Trading Initiative (ETI) Base Code, revising ourmonitoring protocol, and providing additional training
for our team on challenging compliance issues. For
more information, please see our goals for 2005–06
on page 13.

Gap Inc. 2004 Social Responsibility Report

THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

25

GAP INC. ASSESSMENT AND RECOMMENDATIONSSocial Accountability International
Gap Inc. participated in SAI’s Corporate Involvement

AUDITING:

Program (CIP) Pilot Assessment, an objective evalu-

The observed VCO teams are highly motivated and doation of its social compliance program. It included aa very competent job in many aspects. Nevertheless,headquarters visit, a transparency review by Sustain-

their time is used inefﬁciently. VCOs are deployed on

Ability, and SAI ﬁeld reviews of Vendor Compliance

an excessive number of short visits – typically only one

Ofﬁcer (VCO) audits at factories in China, Turkey,

day per factory (not enough for a thorough job) –Guatemala and India.

rather than more concentrated, in-depth,
well-planned audits. Like most social auditors,

The assessment was based on the ﬁve elements listed

VCOs lack sufﬁcient skill in hard-to-audit areas likebelow. Findings were shared with a multi-stakeholder

freedom of association and discrimination.

review panel that presented a set of recommendations
to Gap Inc. The panel members were Neil Kearney,

Key Recommendations: Deploy VCOs in a more

Secretary General of the International Textile, Gar-

concentrated manner, with longer audits at larger

ment & Leather Workers Federation, Dorianne Beyer,

facilities and less frequent monitoring. Provide formal

General Counsel of the National Child Labor Commit-

auditor training, make passage of auditor exams a job

tee, and Achim Lohrie, Head of Strategy Development

qualiﬁcation and, over time, shift to more diagnostic

and Controlling, Environmental and Social Policy

audits by third-party accredited auditors.

Department, Otto (GmbH).
DEVELOPMENT APPROACH:

Key Findings & Recommendations

Gap Inc. has no formal training program for its
suppliers, managers or workers.

MANAGEMENT SYSTEMS:
Gap Inc.’s scope of compliance procedures encom-

Key Recommendation: Develop and provide apasses all its vendor facilities, including subcontrac-

regular program for supplier training in compliancetors. A planned incentive-based “strategic supplier”

requirements, worker rights and human resources

program will link compliance with traditional quality

management.

and reliability ratings of vendors. Both are impressive
best practices.

MULTI-STAKEHOLDER PARTICIPATION:
Gap Inc. engages in several multi-stakeholder

Key Recommendations: Include contract employees,

initiatives and has recently expanded that involvement.

homeworkers, supervisory and management person-

Gap Inc. is highly regarded by these groups.

nel within monitoring scope. Link “strategic supplier”
performance to an internationally recognized multi-

Key Recommendation: Develop a more coordinatedstakeholder standard and to measurable improvement

strategy to work with trade unions and their local

towards meeting that standard.

afﬁliates.
TRANSPARENCY:
Gap Inc.’s “warts and all” 2003 Social Responsibility
Report received well-deserved praise from stakeholders and the public.
Key Recommendation: Provide more measures ofprogress and disclose more numerical performancetargets.

26

FORGING SUSTAINABLE SOLUTIONS THE ART OF FACTORY MONITORINGGAP INC. PROGRAM AND TRAINING NEEDS ASSESSMENT
Verité
In 2004, Gap Inc. commissioned Verité, a not-for-Key recommendations included:

proﬁt monitoring, training and research organization,• Increase the level of credible information

to study its Global Compliance program. The aim wasgathered from workers

to enhance program efﬁciency and scope by identifying strengths and weaknesses in Gap Inc. vendor• Strengthen alignment between sourcing andengagement, internal training and management

compliance strategies

systems, as measured against company goals andexternal best practices.

• Capture best practices and lessons learned in theﬁeld, especially remediation strategies

The Assessment provided a quantitative evaluationof Gap Inc.’s performance, assessing the effective-• Standardize training, ﬁeld protocols and processes

ness of Gap Inc. auditors at identifying various typesof Code of Conduct violations in sample factories• Increase technical support and training to ﬁeld

and the extent to which violations were remediated.

staff on chronic compliance issues, root cause

Verité’s Assessment also engaged Global Compli-

analysis, corrective action planning and gathering

ance ﬁeld and headquarters staff and factory manag-

information from workers

ers in discussions about their work, program impact
and priorities for improvement. Verité recommended• Re-orient ﬁeld staff and match staff competencies

measures to strengthen management systems, build

to the remediation function to increase the impact

ﬁeld capacity, support vendor ownership, strengthenof the Vendor Ownership Programfacility monitoring and broaden relations with external• Increase vendor support through such initiatives

stakeholders.

as social compliance management training

Global Compliance program strengths included:• Decentralized and ﬂexible structure, management
and operations• Support for openness and innovation• Experienced staff and an effective “on-boarding”
process

Photo:
Members of the Gap Inc.
Global Compliance teamparticipate in a training
session led by Verité in
Bangkok, Thailand.

• Well-documented systems and procedures• Integration of social compliance policy into
corporate strategy and planning• Engagement with external stakeholders

NOTE:
Gap Inc. compensated SAI and Verité for their assessments. Bothgroups have also provided consulting services to the company on
auditing and training issues. Gap Inc. is a member of SAI’s
Corporate Involvement Program.

Gap Inc. 2004 Social Responsibility Report

THE ART OF FACTORY MONITORING FORGING SUSTAINABLE SOLUTIONS

27

Integrating Labor
Standards into Our
Business Practices

Reengineering our supply chain has been a toppriority since Gap Inc. launched its ﬁnancial turnaroundthree years ago. Historically, a system of quotas madeit difﬁcult to manage our supply chain strategically.
Strict limits on the amount of apparel that companies could import from any one country forced us to

We strongly believe that making

spread production across more sourcing markets
than we liked. Because they couldn’t always rely oncompliance a basic part of how ourlarge quantities of our business, our manufacturers

industry does business is essential

their operations.

to forging sustainable solutions.

had limited incentive to partner with us to improve

The expiration of these quotas at the end of 2004 has
given us an opportunity to consolidate our sourcing
base, reinvent our relationships with manufacturers
and transform our supply chain into one that truly
reﬂects our values and business needs.
Although we now have more control over where
we do business, we don’t intend to put all of our
production in one place. We believe we need a diverse
sourcing network to mitigate geographic risk,increase speed-to-market and deliver the wide
variety of products we sell in our stores.

28

FORGING SUSTAINABLE SOLUTIONS INTEGRATING LABOR STANDARDS INTO OUR BUSINESS PRACTICESTHE END OF QUOTAThis section discusses several ways that we areleveraging our purchasing power and closer relation-

In 1974, the internationally negotiated Multi-Fiberships with manufacturers to integrate labor stan-

Arrangement (MFA) created a system of quotas

dards directly into our supply chain operations. The

that put a cap on the quantity of textiles andvarious efforts we describe below – such as making

apparel that companies in the United States andlabor standards a more important part of our buying

Europe could import from any one country. These

decisions, improving factory operations and reducing

restrictions led to a practice known as “chasing

inefﬁciencies in our purchasing practices – are still inquota,” in which buyers met their production needs

the early stages of development. We strongly believe,by scattering orders over dozens of different

however, that making compliance a basic part of how

countries. As a result, garment industries were

our industry does business is essential to forging

artiﬁcially created in many places that otherwise

sustainable solutions. We look forward to providing

lacked the proximity, infrastructure, workforce or

updates on our progress in this important area incost base to compete effectively in an open market.

future reports.

With the expiration of these quotas at the endof 2004, companies are now basically free

BUILDING CLOSER RELATIONSHIPS WITHOUR GARMENT MANUFACTURERS

to begin consolidating their sourcing bases andEarlier this year, we invited our largest garment andconcentrating production with preferred

textile manufacturers to San Francisco for our ﬁrst

manufacturers.

Gap Inc. Global Vendor Summit to share our new
business and sourcing strategies and discuss ways towork together more effectively.

As we discuss in this section, we believe industry
consolidation creates opportunities to begin
integrating labor standards directly into sourcing

One of our key goals is to develop a better

practices. Still, we share widespread concerns

understanding of what our garment manufacturers

about the consequences of consolidation for

do best. The capabilities required to produce

countries that have come to rely on the garment

garments can vary widely. For some garments, quality

industry for jobs and revenue. On page 38, wemay be a key consideration, while for others, cost or

discuss our commitment to help manage aspeed-to-market might be more important. Some

responsible transition to a post-quota environment

manufacturers generally produce basics throughout

through participation in the MFA Forum, a newly

the year, while others are highly specialized andformed multi-stakeholder effort.

seasonal. Different factories have different
competencies and strengths, and it is importantthat we distribute our production accordingly. For
example, asking a small factory known for quality toOver time, though, we intend to start concentrating

deliver a large order in a short period of time cana greater percentage of our production with our best

create risk in delivery and place unintended burdens

manufacturers. As our relationships evolve, we expect

on factory workers. Ultimately, we must work tothem to work with us more closely to drive continuous

ensure the strengths of our vendors are aligned withimprovement in all aspects of our supply chain

the needs of our brands.

operations – including innovation, quality, cost, andlabor and environmental standards.

Gap Inc. 2004 Social Responsibility Report

INTEGRATING LABOR STANDARDS INTO OUR BUSINESS PRACTICES FORGING SUSTAINABLE SOLUTIONS

29

GAP INC. VENDOR SUMMITOur Global Compliance team already inﬂuences

Nick Cullen

sourcing decisions, particularly during the initialapproval process and in cases of serious or

We can’t build our business on our own – no matter

habitual violations. Generally speaking, however,

how good our strategies, no matter how hard weonce Global Compliance approves a factory fortry. This year we are making a deliberate effort toproduction, and unless it mandates termination forbuild partnerships with vendors and to explore howcompliance reasons, our sourcing team places

we can better work together.

production based primarily on other performancerelated criteria, such as innovation, quality and cost.

Gap Inc.’s Global Vendor Summit, held in San Francisco in early 2005, marked
the ﬁrst step in the company’s efforts to create deeper relationships with our

Our new integrated sourcing scorecard will be usedvendors. More than 120 people from our top garment manufacturers and textile

by our sourcing team to make more balanced andmills came together to talk with us about how to work together to address

strategic performance-based buying decisions andchanges in both the industry and our own supply chain.

put more pressure on garment manufacturers to
improve. Each approved factory will be assigned a

The removal of import quotas at the end of 2004 offers new opportunities to work

compliance score based on our pilot factory rating

together more closely and to reward our top performing vendors with higher

tool (see page 24). In the future, this metric will bevolumes and longer-term commitments. Challenges remain in helping vendors

considered along with others, such as how the factory

meet our standards for quality and compliance with our COVC. We’ve made it

performs against basic quality requirements, to de-clear that, in return for our business, we expect more accountability from themtermine whether a factory is suitable for production.

in these areas.
We have already started to see encouraging signs
Developing these kinds of close relationships takes time and coordination.

that garment manufacturers are ready to take

However, we’re conﬁdent that, as we provide increased volumes, our vendors

greater responsibility for working conditions. Last

will be able and willing to make investments to improve innovation, quality, andyear, for instance, four garment manufacturers welabor and environmental standards while decreasing costs.

work with in China sought SA8000 certiﬁcation, a

Nick Cullen is Executive Vice President and Chief Supply Chain Ofﬁcer at Gap Inc.

istered by SAI. The standard, based on ILO and othervoluntary workplace standard developed and adminlabor and human rights conventions, promotes management systems that improve working conditions.
Most garment manufacturers provide services to

It can take as long as two or three years to become

multiple clients, and today, we know little about a

SA8000 certiﬁed and some factories are never able tospeciﬁc manufacturer’s workload beyond the orders

attain certiﬁcation. Yet, one of the factories involved

we’ve placed. For competitive reasons, garment

satisﬁed the requirements in less than three months.

manufacturers often take on more work than they can

The other three did so in approximately ﬁve months.

handle, which not only jeopardizes deadlines but canalso subject workers to excessive overtime hours.

Similarly, we supported a pilot program in Sri Lanka
last year in which two of our approved manufacturers

To encourage garment manufacturers to take morepursued SA8000 certiﬁcation. One of them qualiﬁed in

responsibility for working conditions in the factories

just two and a half months, and the other qualiﬁed inthey own, operate or contract with, we are building

seven months.

labor standards directly into our buying decisions
through an “integrated sourcing scorecard.” Thisoverall assessment of capabilities and performance
will include each factory’s compliance history,
in addition to other production criteria we use when
deciding which manufacturers will get our business.

30

FORGING SUSTAINABLE SOLUTIONS INTEGRATING LABOR STANDARDS INTO OUR BUSINESS PRACTICESIMPROVING FACTORY OPERATIONS
Through our work with thousands of garment
manufacturers and their factories, we know that poor
management and inefﬁcient operating practices cantake a toll on workers. We’ve also seen some evidence
that the most productive and reliable factories tend tohave fewer compliance problems.
Beginning in 2003, we partnered with the U.K. consultancy Impactt and the Hong Kong Productivity Council(HKPC) to pilot a productivity program to determine
if initiatives focused on improving factory operations
and productivity would also lead to better working“Social compliance standards are still evolving

conditions.

and therefore, our policies and procedures should

As part of this program, Impactt and HKPC worked
with ﬁve factories in China over a nine-month period

comply with the most stringent standards available.

to evaluate their existing practices and correct managerial and operational problems, ranging from poor

Since SA8000 is a standard that helps us to effectively

communication to inefﬁcient production processes.

measure and manage social compliance, we had no

The preliminary results, which became available inAugust 2004 and are summarized in the table on thehesitation when Gap Inc. suggested that we consider

next page, exceeded our expectations.

certiﬁcation.”
Southeast Asian garment manufacturer

In the four factories where management was committed to the initiative, there appeared to be a clear
correlation between productivity and better compliance.

Given the program’s success, we’ve also partnered

In the ﬁfth, where no improvements were seen, factorywith the National Productivity Council of India to

management did not implement the suggested changes,

introduce a similar program in four factories in India

despite encouragement from its parent corporation.

in 2005.

The most committed participant, Factory A, not only

We believe these pilot projects could ultimately help

generated signiﬁcant annual savings in its opera-

us articulate a compelling business case that moti-

tions by using raw materials more efﬁciently, but also

vates our garment manufacturers and others in the

reduced worker turnover by more than 50 percent.

garment industry to achieve higher levels of compli-

Because workers were paid a piece rate, improved

ance. In the meantime learnings from these programs

productivity led to a 50 percent increase in their total

are providing us with more creative and effective tools

monthly pay. Other factories experienced increases

for addressing intractable problems such as exces-

in hourly and monthly pay, as well as reduced cycle

sive overtime and working hour violations in our own

times, more efﬁcient fabric use and lower reject rates.

manufacturing base.

Based on these results, two of the participating
factories have continued to work with an industrial
engineer from the project, with our VCOs serving
as facilitators. Another participant hired a full-time
employee to manage a similar internal productivity
program. And four new Chinese factories have signed
up to start a similar project in 2005.
Gap Inc. 2004 Social Responsibility Report

INTEGRATING LABOR STANDARDS INTO OUR BUSINESS PRACTICES FORGING SUSTAINABLE SOLUTIONS

31

pating in a study to assess the effect better human

REDUCING INEFFICIENCIES INOUR PURCHASING PRACTICES

resource management systems have on productivity,

One of our goals in 2004 was to determine how

product quality, compliance with corporate codes of

inefﬁciencies in our purchasing practices affectconduct and other performance metrics at the factory

working conditions in the factories that make ourlevel. This work is ongoing, but initial results haveclothes. Over the past year, we have seen that webeen promising. For example, there does seem tosometimes unwittingly contribute to compliancebe a link between improved working conditions andissues in a number of ways, ranging from missed

lower worker turnover. Ultimately, the study will

deadlines to last minute design changes.

In addition to our work with Impactt, we are partici-

explore whether training and development programs
can lead to workplace improvements. Evidence of
this nature may help convince garment manufacturers that investing in such management systems isgood for their businesses.

SUMMARY OF IMPACTT PROGRAM RESULTS

FACTORY INFO.

SCOPE

Factory

Location

A

Southern • Redeﬁne role of sewing
Chinasupervisors to focus on workers’ wages and operational
efﬁciency as well as output
and quality

B

Southern • Reduce production
China
inefﬁciencies

PRODUCTIVITY

Primary Areas of Focus

Efﬁciency

COMPLIANCE
Worker Turnover

Overtime

Wages• 99% decrease in number ofmissing units• Decreased from 15% to 6.7%

• 35%
reduction per
month

• 50%
averageincrease inmonthly total
pay• 20% increase in sewing line
efﬁciency• Not measured• No change• 14.3%averageincrease inmonthly total
pay• Small increase due to reduction inwages, which was linked to fewer
overtime hours• Reduced byan average of
87 hours in thesewing section
and 53 hours
in the cutting
section per month• 10%
approximate
decrease inmonthly total
pay due toreduction in
overtime2• Not measured• No change• 4.4%
averageincrease inmonthly total
pay3• Increased in the two sewing lines
assessed• No change• No change• Better tracking of material• Better tracking of material• 44% reduction in leftover fabric• 21% reduction in need for fabricreplacement

C

Northern • Improve productivity in two
China
sewing lines• Provide training for sewing
supervisors• 1.5% increase in ﬁrst sewing line
efﬁciency1• 37% increase in second sewing
line efﬁciency• Need for re-work decreased
from 11% to 6.2%

DSouthern • Manage production for sewing • 7%-42% improvement in cycle
Chinagroupstimes, depending on operation• Reduce cycle time for basic
operations

E4• Factory established appraisal system for supervisors to assess quality and determine training needs• 20% reduction in reject rates

Southern • Manage production for sewing • No change
Chinagroups• Improve tracking of material

1 Although productivity improved 53 percent in the ﬁrst four months in this sewing line, it fell drastically in the ﬁfth month due to more complex orders being produced.
2 Management did increase piece rates by about 10 percent, but the increase did not fully compensate for the decrease in overtime hours. Impactt recommended that the factory
continue working to improve its productivity to ensure that workers would be able to earn the same wages in fewer hours.
3 During one of the project months, a new style was introduced that was unfamiliar to workers and productivity declined. Without this change, the average wage increase would havebeen signiﬁcantly higher.
4 In its ﬁnal report, HKPC stated “the commitment from the factory was not strong during the course of the project. The project team [in the factory] was rather passive and created the
feeling that there was not [a] genuine need to drive the project in the factory."

32

FORGING SUSTAINABLE SOLUTIONS INTEGRATING LABOR STANDARDS INTO OUR BUSINESS PRACTICESIn our industry, alterations to an order are often

LOOKING AT PURCHASING PRACTICES

made even after an item is in production. Many

Trini Leunggarment manufacturers can manage such changes
and deliver on time or with an acceptable delay

In the report Trading Away Our Rights (2004), Oxfam produced evidence to show

without compliance violations. Some, however, may bethat clothing retailers’ demands for faster, more ﬂexible and cheaper produc-

unable to complete an order on time without requiring

tion in their supply chains undermine the very labor standards they claim to be

more hours or higher productivity levels frompromoting. Ethical codes of conduct alone cannot alleviate the endemic problem

factory workers. These circumstances can lead toof precarious employment so long as retailers fail to address the part they playviolations if management does not act appropriately.

in causing poor working conditions.

We need to be aware of these potential issues andmanage our business accordingly.

We encourage Gap Inc. and other retailers to get the clothing industry to tackle
the problem of abusive conditions and bring about meaningful improvements so

In consultation with our garment manufacturers,

that workers and women producing their goods can enjoy decent work andwe began working last year to redesign our produc-

livelihoods. Incorporating commitments to workers’ rights and poverty allevia-

tion processes. We are seeking to streamline ourtion into their sourcing and buying strategies is critical to achieving this. Forprocesses and reduce wasted time while still allowing

example, improving critical path management of their supply chain and building

our teams ﬂexibility to react to trends.

long-term partnerships with suppliers can avert the problem of excessive
overtime and insecure employment among garment workers.

As a result of this work, we have made progress
toward ensuring that our production calendars

The U.K.-based Ethical Trading Initiative working group on purchasing practices

consistently reﬂect real manufacturing deadlines andcould be a most constructive forum to develop a model of change that engages

that our teams adhere to them. Each of the functions

a wide group of companies, unions and NGOs. Clothing retailers need to meet

involved in developing our products – from design

the challenges of committing the time, resources and openness to this initiativeand merchandising to sourcing and production – hasand identify solutions so that precarious employment among clothing workers

committed to monitor its performance against thiscan be alleviated.

new schedule. In fact, stricter adherence toTrini Leung is a policy adviser for Oxfam in Great Britain.

production calendars will be built into individual
performance goals.
We’re also beginning to involve manufacturers earlier• Increasing awareness among our employees.

in the production cycle so they can better understandour product design requirements. And we recently

A pilot program within Gap brand will use a variety

launched three initiatives to increase our understand-of training scenarios to help our merchandising anding of the potential consequences of our sourcing

design teams understand the impact that theirpractices:

decisions can have at the factory level.

• Giving garment manufacturers the opportunity to• Studying purchasing practices across the garment

evaluate our performance. As part of our inte-industry. We will take a broader look at purchas-grated sourcing scorecard, garment manufacturers

ing practices across the garment industry throughwill be asked to provide feedback on our work-

the ETI working group on purchasing practices, ining relationships, including how often we change

which participants will assess and share ﬁndings onorders after placing production and whether we aredifferent aspects of their production processes. This

meeting our stated commitments.

work will also be the basis of a report we’re doing
as part of our membership in the Business Leaders
Initiative on Human Rights (BLIHR).

Gap Inc. 2004 Social Responsibility Report

INTEGRATING LABOR STANDARDS INTO OUR BUSINESS PRACTICES FORGING SUSTAINABLE SOLUTIONS

33

Progress ThroughPartnerships
Meaningful change requires not

Through better monitoring and the integration of

only a ﬁrm commitment andlabor standards into our supply chain operations, wesustained effort, but also scalable,

ment manufacturers and buyers contribute to poor

are beginning to address some of the ways that gar-collaborative strategies thatworking conditions.

leverage the inﬂuence, resources

But as we’ve discussed, the causes of poor working

and capabilities of stakeholders
from all sectors.

conditions are much broader than just shortsighted
factory management or inefﬁcient purchasing practices. Problems in factories are often a reﬂection of
external issues far beyond the immediate control ofany single company or management team.

Photo:
Gap Inc. Vendor ComplianceManagers participate in
an audit led by Verité in
Bangkok, Thailand.

34

FORGING SUSTAINABLE SOLUTIONS PROGRESS THROUGH PARTNERSHIPSAt the industry level, decentralization andinconsistent labor standards put a strain on limited
enforcement resources and create incentives forgarment manufacturers to take the easy way out.

or non-existent enforcement, and economic

THE IMPORTANCE OF CROSS-SECTORCOLLABORATION

underdevelopment deny garment workers the legal

Mary Robinson

At the country level, weak labor laws, erratic

recourse and alternative employment opportunities
that workers in other countries often rely on for relief

One of the most promising developments infrom undesirable working conditions.

recent years is that more and more businessleaders are recognizing that they have an

And at the international level, the expiration of quotas

important part to play in fostering greaterand rising expectations among consumers arerespect for human rights, labor rights andcreating new competitive pressures and threatening

the environment around the world.

the livelihood of thousands of people.
The goal is not to “privatize” management of these issues. We can’t expect, nor
Having a signiﬁcant impact in such an environment

should we wish, that companies take on such a challenge alone. I have always

can be difﬁcult. As we learned from our experience insaid that primary responsibility in such matters rests with governments.

the Global Alliance, which dissolved last year, meaningful change requires not only a ﬁrm commitment

I also believe, however, that no other societal factor has the potential toand sustained effort, but also scalable, collaborativetransform the way people live and work more than the private sector. For thisstrategies that leverage the inﬂuence, resources andreason and others, business leaders must be dedicated participants in broader

capabilities of stakeholders from all sectors.

efforts to safeguard our planet and secure a life of dignity for all people.

INCREASING OUR EMPHASIS ON
SCALABLE PROGRAMSRegulation can help minimize abuses and enforce compliance with minimum

As the maps on pages 6 and 7 illustrate, we are

the environment are to become an integral part of business strategies and day-currently involved in a variety of initiatives in areas

to-day operations, regulation alone won’t be sufﬁcient. It must be coupled withranging from worker education and vendor ownershipa concerted effort to stimulate good practices, to be innovative and to provide

to independent monitoring, public policy andleadership. Together, government, civil society and the private sector must build

productivity enhancement.

a framework in which doing the right thing also makes good business sense.

In the past, we have selected projects based largely

Mary Robinson, the ﬁrst female president of Ireland (1990-1997) and, more

on a combination of opportunity, relationships andrecently, United Nations High Commissioner for Human Rights (1997-2002),

norms. But if universal principles in the areas of human rights, labor rights andneed. We have cast our net wide to learn how to

has spent most of her life as a human rights advocate. In her current capacities

partner with external organizations, how to maximize

as founder of Realizing Rights: The Ethical Globalization Initiative and as

beneﬁts for workers and how to bring about lasting

Honorary Chair of the Business Leaders Initiative on Human Rights (BLIHR),

change. In short, we have explored and experimented.

Mrs. Robinson is working with member companies, including Gap Inc., toensure that respect for human rights is built into their business practices.

This year, we are begining to take a more focused,strategic approach. Small projects that enable us
to innovate, respond quickly to urgent issues and

To do this, we are strengthening our internal resources

establish new partnerships will continue to be an

and looking for ways to amplify the impact of our efforts.

important part of our work. But we also want to place

We have reorganized our team to achieve bettermore emphasis on broader-scale initiatives that

regional alignment. We have people around the world

target systemic issues and have the potential to help

focused on global partnerships, the environment,

drive industry-wide change.

health and safety, and global operations. And weare broadening the skills and responsibilities of ourmonitoring organization through training on
stakeholder engagement and the management oflocal initiatives.

Gap Inc. 2004 Social Responsibility Report

PROGRESS THROUGH PARTNERSHIPS FORGING SUSTAINABLE SOLUTIONS35

Last year, we invited stakeholders from around theworld to join us for one of two full-day sessions dedicated to exploring emerging issues in the garment
industry. More than 40 leaders and experts attended
the meetings, which were held in Washington, D.C.
and London.
While the sessions were not designed to craft
solutions, they helped deepen our understanding of
the industry’s changing landscape and the differing
views and priorities of our stakeholders. Participants
raised a wide variety of topics ranging fromsanitation to AIDS awareness, but three dominantthemes emerged from our discussions:Greater Transparency — Participants from all
sectors stressed the continued need for robust
reporting that uses new tools and channels toincrease transparency into factory conditions, aswell as corporate practices and policies. Several
We will also strive to move our most promising ideas

stakeholders also believe that retailers could help

from the pilot level to the program level. We will seek

them defend the rights of workers more effectively

to create a timeline that encourages the concurrent

by disclosing the names and locations of thedevelopment of complementary projects. And we will

factories that produce their products.

continue to participate actively in multi-stakeholder
and multi-lateral frameworks that promote collabor-

More Active Involvement in Public Policy —ative and standardized approaches to improving labor

Stakeholders in the United States were particularly

standards across our industry.

eager to see global brands take a more active rolein shaping legislation and trade policies that support

CONTINUING COMMITMENT TOSTAKEHOLDER ENGAGEMENT

labor standards and promote economic growth inless-developed countries.

Our Global Partnerships team, which was founded in
2002, concentrates on promoting collaboration and

Collaborative Approach to Quota Expiration andcultivating the extensive stakeholder relationships

Other Challenges — Many stakeholders stressed thecritical to forging scalable and sustainable solutions.

need for a collaborative approach to mitigating the

The team’s ongoing outreach to leaders in govern-

near-term economic consequences associated withment, civil society, trade unions and academia

the expiration of quota, as well as other challenges

enriches our thinking, provides us with opportunities

facing the garment industry.

to get involved in local and regional projects, andmakes it possible for us to participate constructively

We can’t promise to take action on all of thesein multi-stakeholder initiatives at the industry andsuggestions, particularly in the immediate future.

international levels.

This feedback, however, has helped us reassesscertain aspects of our approach, and we areincorporating it as we develop our strategy for the
coming years.

36

FORGING SUSTAINABLE SOLUTIONS PROGRESS THROUGH PARTNERSHIPSONGOING PARTICIPATION IN
MULTI-STAKEHOLDER INITIATIVES (MSIs)

GRI APPAREL AND FOOTWEAR SECTOR
WORKING GROUP

Our membership in MSIs such as the Ethical Trading
Initiative (ETI), Social Accountability International (SAI)In 2004, we agreed to participate in the Global

and the Business Leaders Initiative for Human Rights

Reporting Initiative's (GRI) working group to develop(BLIHR) enables us to participate in efforts to address

a GRI Apparel and Footwear Sector Supplement.

problems that are especially challenging or transcend
individual sourcing markets. In this section, weThis supplement, which will complement thediscuss how we are working with MSIs to address

general GRI reporting framework, will cover issues

three of our industry’s most difﬁcult challenges:

speciﬁc to the apparel and footwear industries.

developing a uniform code of conduct andIt will be drafted by a multi-stakeholder group,

consistent methods of enforcement, mitigating theworking in conjunction with the GRI, over aconsequences of post-quota consolidation, and12-month period in 2005-06. The group includes

protecting homeworkers.

approximately 20 members representing ageographically diverse mix of major brands,

Developing a Uniform Code andMore Effective Enforcement Mechanisms

leading manufacturers, civil society organizations,trade unions and investors.

In last year’s report, we stated that we would support
a uniform code that is at least as stringent as our

We see this work as an important step towardcurrent requirements and consistent with the ILO's

greater standardization of reporting in the apparelcore labor standards.

industry. The GRI’s multi-stakeholder approach willbring together a variety of perspectives, which will

We continue to believe that a uniform code – andhelp ensure spirited dialogue and debate on labor

more efﬁcient and consistent methods of enforcement

standards and other key industry challenges.

– would promote faster and more sustainable change
across the industry. Garment manufacturers would

We appreciate the opportunity to participate in themake more progress if the playing ﬁeld were level,

development of a common set of indicators thatand they had an incentive to invest in a single set ofcompanies in our industry can use to measure andrequirements. Instead of spending money on dozens

report progress. Since the group’s work will beof different audits in the same facility, buyers could

based on consensus, we hope that the ﬁnal productleverage consolidated third-party monitoring services

will carry a high level of credibility and acceptanceand concentrate more on other issues like remedia-

among a diverse set of users.

tion, capacity building and community development.
The GRI working group will operate in a transparent
Unfortunately, developing a code and corresponding

manner by posting draft materials on the Internet

enforcement processes that are acceptable toand inviting public comment on the ﬁnal working

everyone has not proven to be easy.

draft. The output of the group will be publishedby GRI as Pilot Version 1.0 of the GRI Apparel andOur highly fragmented industry already has many

Footwear Sector Supplement, which will be subject

codes. Most organizations and companies haveto further testing.

historically been reluctant to adopt standards developed by others for reasons that include professional
rivalry, genuine disagreement over content and thelack of concrete incentives to change.

Gap Inc. 2004 Social Responsibility Report

PROGRESS THROUGH PARTNERSHIPS FORGING SUSTAINABLE SOLUTIONS

37

As we discuss earlier in this report, we don’t
anticipate an immediate migration of all textile andapparel production to a handful of countries. There is
strategic value in maintaining a diversiﬁed sourcing
base, and new safeguard measures and tariff policies
are likely to slow consolidation in the near-term.
Still, we are already seeing consolidation in theindustry’s manufacturing base, and we expect thistrend to continue over the next several years.
To help address issues associated with consolidation,
we were one of the ﬁrst companies to join the MFA
Forum, a multi-stakeholder effort that has developed
Still, we should be able to reach common ground,a broad set of recommendations to help governments,

particularly as respected groups such as the Clean

international institutions, suppliers, NGOs, trade

Clothes Campaign (CCC), ETI, the Fair Labor Associa-

unions and retailers manage the transition to ation (FLA), the Fair Wear Foundation (FWF), SAI andpost-quota environment in a responsible fashion.

the Worker Rights Consortium (WRC) continue todevelop viable alternatives to proprietary codes.

As a Forum member, we are committed to
exploring alternatives before moving our production.

Last year, these six multi-stakeholder organizations

Where possible, we will seek to work with national

came together in Turkey to launch an effort known

governments to help them improve labor standards

as the Joint Initiative on Corporate Accountability andand increase competitiveness. We will monitor ourWorkers’ Rights. Over the next two-and-a-half years,

manufacturers for compliance with national laws

this initiative will develop a common code and work

pertaining to factory closures. And when it doeswith participating garment manufacturers – including

become necessary to exit a country, we will seek to

one or more that produce our apparel – to develop ado so in a manner that respects applicable laws,

common code and consistent methods of implemen-

the rights of workers and the needs of affectedtation. Given the large corporate memberships of thecommunities.

multi-stakeholder organizations involved, we believe
this is one of our best opportunities to gain industry-

Our Global Compliance management team will be

wide buy-in on a global solution. We hope that many

working with our sourcing teams in 2005 to explore

buyers and garment manufacturers will choose to

ways to integrate these practices into our supply

adopt and implement the ﬁnal recommendations.

chain policies and procedures. We are also reachingout to garment manufacturers to help them under-

As an interim step, and in light of our membership instand the importance of social considerations when

ETI and SAI, we are reviewing our own Code of Vendor

determining where to operate factories.

Conduct against the ETI Base Code and SA8000 standard in 2005.

Protecting Homeworkers
From an economic and humanitarian perspective,

Managing the Transition
to a Post-Quota Environment

one of the most complex challenges in our industry

Over the past several months, we have been working

interests of some of the world’s most vulnerable

to develop a better understanding of the likely conse-

garment workers – the “invisible” people who work

quences of post-quota consolidation and what can beon a project basis from their homes.

done to help mitigate negative effects.

38

FORGING SUSTAINABLE SOLUTIONS PROGRESS THROUGH PARTNERSHIPS

is ﬁnding an effective way to protect the rights andMFA FORUM:
ADDRESSING THE CHALLENGES OFQUOTA EXPIRATION
Neil Kearney and Lynda Yanz

“Homeworkers,” as they are known, perform
services ranging from basic stitching and beading toelaborate embroidery and basket weaving. They havebeen major contributors to the garment industry, andmany other industries, for decades.

In a unique collaboration, a number of brands and
For a variety of social, cultural and economic reasons,retailers, including Gap Inc., international

most homeworkers do not work outside their homes

institutions, trade unions and NGOs – the “MFAor villages. They rely on independent contractors andForum”– have joined to address the challenges

sub-contractors to bring work to them, and generally

arising from trade liberalization in textiles andhave little or no knowledge of the factory or buyer for

clothing as a result of the ending of the Multi-

which they are making products. Because they work

Fibre Arrangement (MFA).

alone and often in remote locations, homeworkers
may enjoy even fewer protections and beneﬁts than

The MFA Forum recognizes that failure to handle, responsibly, the transition

their counterparts who are employed in factories.

to a post-MFA world carries several dangers, including the negative impact onworkers of losing critical employment and earnings potential and damage to

In 2004, we joined ETI’s multi-stakeholder working

the reputation of business.

group to begin to address the challenge of protecting
these workers. With the cooperation of 13 garment

The Forum’s Collaborative Framework for Guiding Post-MFA Action

manufacturers who produce apparel for ETI’s mem-

proposes a wide spectrum of actions at both the national and internationalbers, an India-based ETI research team conductedlevels by all actors to ensure equitable development and decent work in theextensive interviews with homeworkers, contractors,

post-MFA world. This guide to dealing with MFA impacts is particularly

sub-contractors and garment manufacturers, as wellimportant for brands and retailers reviewing sourcing strategies.

as local government, trade union and NGO representatives. The group delivered its ﬁrst set of research

Brands and retailers must promote decent work by maintaining their current

ﬁndings in October 2004.

country supply base; when consolidating in-country, ensuring that displaced
workers are given ﬁrst opportunity for re-employment in the consolidated

We recognize that working at home is a criticalsupply chain; and sourcing only from countries that respect core labor stan-source of income for many people and that we must

dards and suppliers who provide decent work.

be careful to ensure that our efforts are balanced
and do not result in an unintended loss of jobs. The

Putting all of this into practical action will be a real test of corporate social

goal of this work is to ensure that homeworkers are

responsibility on the part of the brands and retailers. We welcome Gap’s

treated fairly. Over the course of the next year, we will

involvement in this important initiative.

be working with our ETI partners to build upon theseﬁndings and develop a common set of guidelines to

Neil Kearney and Lynda Yanz were among the founders of the MFA Forum.

focus our efforts in this area.

Mr. Kearney is General Secretary, International Textile, Garment & Leather
Workers’ Federation (ITGLWF). Ms. Yanz is Coordinator, Maquila Solidarity

EXPANDING OUR PUBLIC POLICY EFFORTS

Network (MSN).

We recognize that thoughtful public policy advocacy
is an important part of our broader efforts to improvelabor standards. As mentioned earlier, many stakeholders have told us that they’d like to see us deepen
our public policy work.

Gap Inc. 2004 Social Responsibility Report

PROGRESS THROUGH PARTNERSHIPS FORGING SUSTAINABLE SOLUTIONS

39

We agree that the debate over challenges and disparities due to globalization often overlooks the criticalrole of the private sector. Although we are still in theprocess of developing our strategy on public policy
outreach, we believe that companies like Gap Inc. canwork with government, trade unions, civil society andopinion leaders to develop collaborative approaches
and institutional mechanisms to further the public interest and beneﬁt business. We are exploring various
projects and partnerships to help ﬁll governance gaps
and build greater capacity in transitional economies.
We also believe that, beyond speciﬁc initiatives in

CENTRAL AMERICA

individual countries, the business community shouldcome together to have a more signiﬁcant collective

Central America’s proximity to our United States

impact. To this end, we played a role in the formation

and Canadian operations facilitates communication,of the Business Coalition for Capacity Building

reduces transportation costs and accelerates speed(BCCB) in 2003.

to market, which enables us to respond quickly to
ﬂuctuations in demand and shifts in trends.

A voluntary, cross-industry effort, the BCCB provides
a collaborative platform through which companies can

To remain competitive in the post-quota era,

work with civil society, government and multilateral

however, manufacturers in Central America willlending institutions to address shared concerns andhave to offset higher operating costs with innova-

develop innovative approaches to capacity building.

tion, greater efﬁciency and better compliance withThe BCCB is focused not only on labor standards, but

labor laws and standards.

also on customs and environmental compliance, public health, enforcement of intellectual property rights,

To help Central America meet these challenges

supply chain security, and workforce training andand grow as a strategic sourcing market, we are

education. We are joined in this endeavor by several

actively involved in two programs called Continu-

major U.S. companies. We hope that still other com-ous Improvement in the Guatemalan Workplace

panies will see the beneﬁt of participating, and that

(CIMGUAW) and Continuous Improvement in thetogether we can make a greater difference in sharing

Central American Workplace (CIMCAW). The pro-the beneﬁts and responsibilities of global commerce.

grams were launched in partnership with USAID,
Development Alternatives Inc. (DAI), Timberland,

THE ROAD AHEAD

SAI, the Commission for the Veriﬁcation of Codes

Measuring progress at the country, regional orof Conduct (COVERCO) and the International Textile,industry level is even more challenging than track-

Garment & Leather Workers’ Federation (ITGLWF).

ing improvement in individual factories. Still, we’veseen encouraging signs that measurable change on a

CIMGUAW and CIMCAW will provide training on

broad scale is possible through collaboration.

labor standards to factory managers, supervisors,
workers and monitors in Guatemala and other

There is, perhaps, no better example of this thanCentral American countries. We hope to see theCambodia. For several years, the government, gar-programs expand in the coming years to address ament manufacturers and unions there have actively

larger audience and broader range of topics, suchsought opportunities to partner with buyers and civil

as factory monitoring, additional stakeholder

society as part of an ongoing effort to improve labor

engagement and remediation mechanisms.

standards and build a stable foundation for the continued growth of the Cambodian garment industry.

40

FORGING SUSTAINABLE SOLUTIONS PROGRESS THROUGH PARTNERSHIPSCambodia’s government sent a strong signal of its

CHINA

commitment to cross-sector collaboration in 1999,
when it signed a bilateral trade agreement with the

In March 2004, we joined with several other

United States that, among other provisions, createdbrands to begin talking with the China Association

an extensive monitoring program involving the ILO.

of Enterprises with Foreign Investment (CAEFI)– an afﬁliated body of the Chinese Ministry ofSince then, we have participated in a number ofCommerce – about opportunities to improve

collaborative initiatives in Cambodia. We continue toenforcement of China’s labor laws at the provincial

support the ILO’s monitoring and remediation efforts,

and local levels.

which aim to improve working conditions and boost
productivity in Cambodian factories through more

Today, we are partnering with CAEFI and several

worker involvement. In 2004, we provided funding tocompanies – including adidas-Salomon, IKEA, Nike

CARE for a factory-based health program. And mostand Reebok – to formalize a subcommittee known

recently, we joined with the International Financeas the Better Workplace Foundation, which will be

Corporation’s Mekong Private Sector Development

open for other companies to join and continue thisFacility (IFC/MPDF) to launch Supervisory Skills

dialogue on an ongoing basis. The group will also

Capacity Building (SSCB), a new managerial skills

work with provincial labor departments to help

training program for 650 factory supervisors.

factory owners and management understand how
better labor standards can help improve theChallenges remain in Cambodia. But we were pleased

productivity and proﬁtability of Chinese enterprises.

by the ILO's decision earlier this year to continue
efforts there and by a recent World Bank survey
showing that Cambodia's commitment to labor
standards is helping it compete in the international
apparel market.
We believe Cambodia’s inclusive, voluntary approachto collaboration serves as a model for other countries,

Photo:
Gap Inc. and the IFC/MPDF
launch a new managerial skills
training program in Cambodia.

and we are committed to working with stakeholders
from all sectors to help drive similar efforts acrossthe garment industry.

Gap Inc. 2004 Social Responsibility Report

PROGRESS THROUGH PARTNERSHIPS FORGING SUSTAINABLE SOLUTIONS

41

employees
The Key to Our Success
We want to be a company where people can stretch their capabilities,
grow as we grow and build their careers.
One of the things we’ve learned as we listen to ourThat’s why we are committed to continually improving

more than 150,000 employees around the world isthe employee experience. We want to be a company

that our people want to work for a company that’s

where people can stretch their capabilities, grow as wesocially responsible. Our commitment to social re-grow and build their careers in an environment thatsponsibility, as described in this report, has become

reﬂects and respects their values. In this challenging

an integral part of who we are at Gap Inc. As one

and fast-paced industry, we place a priority on listening

employee said, “It’s a wonderful feeling to be part of

to our employees and providing a supportive, inspiring

an organization that believes in doing what’s right.”

environment in which great people can ﬂourish.

We know that the continued growth of our company

AN ETHICAL AND INCLUSIVE WORKPLACE

depends on such passion, and on the hard work of our

Gap Inc. has been successful by having a vibrant

employees. We create value for our shareholders by

open-door process where employees can express

providing a fantastic customer experience and great

concerns without fear, by working collaboratively

products. And it takes highly satisﬁed and engaged

with employees to solve issues that arise, and by

employees to exceed our customers’ expectations.

ensuring we work together in ways that areconsistent with our values.

42

EMPLOYEESWe are dedicated to creating a workplace in which
the rights, the needs and unique contributions ofevery employee are consistently respected. Just as“I really appreciate the company’s efforts in...making
me feel heard, supporting me, protecting me, and reas-

we hold approved garment manufacturers account-suring me…. To know that my voice did not go unheardable for complying with all applicable laws andtreating workers with dignity and respect, we holdand that Gap Inc. will do what’s right is why I continue

ourselves accountable as well. Our Code of

to appreciate being a part of the Gap family.”Business Conduct helps ensure that we do businessin a responsible way that is consistent with ourvalues. We have absolute respect for our employees’

Feedback from a Gap Inc. employee who raised concerns about managers at
higher levels under the Code of Business Conduct

rights, including freedom of association and providing
working conditions about which we are proud. We arecommitted to an environment free from harassment

Just as we serve a diverse base of customers

and discrimination. And we are continuing to evolveworldwide, we want to reﬂect and include a broad

our processes and communications to ensure a

range of backgrounds, skills and talents at Gap Inc.

positive work environment and a clear understanding

To us, diversity means respecting visible differences ofof our employment philosophy.

age, race, gender, nationality, and physical ability, as
well as invisible differences such as culture, religion,

We also recognize that employees have a criticalmarital status, sexual orientation, experience androle to play in creating an ethical and inclusive

perspective.

workplace. As such, we welcome and encourage our
employees to be fully informed about our programs

In 2004, a council of senior executives throughout theand policies, and their options and rights ascompany identiﬁed several steps to further increase

employees. There are a number of avenues wediversity, including the creation of a Department ofprovide to ensure our employees are heard.

Diversity and Inclusion. And this year we are proud
to have been honored by the National Association for

Under our open-door policy, employees are encour-

Female Executives as one of the “Top 30 Companies

aged to raise questions, concerns or suggestions, andfor Executive Women.”to reach out to managers, supervisors and our Human
Resources team as needed. In addition, we have a

The quality of our work experience depends on the

24-hour conﬁdential hotline that employees – andquality of our combined efforts to create a great work

members of the public – can call anonymously if theyenvironment. By focusing on treating each other withsuspect a violation of our Code of Business Conduct.

respect and approaching our work relationships withIn the United States, Canada and Puerto Rico the toll-

integrity and open-mindedness, we’ll continue to be

free number is (866) Gap-Code. Information on how tosuccessful in maintaining Gap Inc. as a great placereach the hotline from other locations is provided in

to work.

the Corporate Compliance section of www.gapinc.com.
We also recognize the need for ongoing training for

ATTRACTING AND RETAINING
TALENTED PEOPLE

managers and employees to ensure all employees

We want people to see Gap Inc. as a place to build

adhere to our Code of Business Conduct. To that end,

their careers. That’s why we constantly focus on

this year, we introduced a required training program

improving the overall employee experience.

called the “Principles of Integrity” to help our employees understand how our Code applies to their work.

Gap Inc. 2004 Social Responsibility Report

EMPLOYEES

43

Our aim is to increase satisfaction and retention rates

Key elements include:

among our teams, and we work hard to provide thetraining and development opportunities to help employ- • Competitive compensation that is linked toees to be successful in their current roles and to takeperformance goals and reﬂects each employee’s

on new roles in other brands and divisions within thecontribution to Gap Inc.’s success. We conduct ancompany. One of our goals is to assist store employees

ongoing analysis of compensation across the indus-

who’d like to pursue career opportunities throughout

try and among other companies to ensure that Gap

our company, and we seek a healthy mix of experiencesInc. continues to attract the best employees andand perspectives as we build our teams. Our interna-

reward them competitively.

tional initiatives and the upcoming launch of our fourthbrand, Forth & Towne, create even more opportunities• Beneﬁts tailored to the needs and lifestyles of ourfor our employees, and our job is to recruit, develop

employees. In addition to highly competitive healthand promote employees across Gap Inc.

and retirement beneﬁts, we are proud to offer awide variety of desirable lifestyle beneﬁts, including

Enabling people to realize their full potential also re-generous paid-time-off and family leave policies,

quires an open, honest, two-way ﬂow of communication.

merchandise discounts of up to 50 percent when

We are committed to understanding employee issues

employees shop in our stores, tuition reimburse-from a variety of diverse perspectives, and we encourage

ment programs and discounts on personalan open dialogue through formal and informal channels,

computers. Through Gap Foundation, we also

including surveys, focus groups and our open-door policy.

provide matching gift programs that complement

Through our “Pass It On” surveys, for example, we re-employee charitable contributions for employees

ceive quarterly feedback from store managers. Our “Yourin North America, the U.K., and Hong Kong. (SeeVoice” survey allows employees to provide anonymous

the “Community Involvement” section for additional

feedback and comments at any time to senior manage-

information about Gap Foundation.)ment. And last year, we piloted a survey with a group of
employees, which we plan to expand to all employees.

A new global recognition program, the Founders’Award, honors the philanthropic spirit of Gap Inc.’s

A HOLISTIC APPROACH TO REWARDS

founders, Doris and Don Fisher. The award will

Retaining, motivating and empowering employees

recognize Gap Inc. employees who are alreadyalso requires the right mix of rewards, tailored to meetmaking a difference in their community – and givethe unique needs of people at different levels and atthem the opportunity to create their own lasting

different career and life stages.

philanthropic legacy. The award winner will receive
up to 80 hours of paid time to work with his or her

We’ve always viewed compensation as more than

44

EMPLOYEES

community partner – a nonproﬁt or non-govern-

simply salary and beneﬁts. In 2004, we launchedmental organization that supports a cause for which

Rewards@Gap Inc., a program that brings together all

they’ve been involved. This organization will also

the ways we reward and recognize our employees.

receive a Gap Inc. grant of up to $50,000.

OUR PURPOSE, VALUES AND BEHAVIORS
2004 marked our 35th birthday as a company. It
also marked the start of a new cultural framework
for the company. We call this framework our
Purpose, Values and Behaviors (PVB).
PVB is an articulation of why we do what wedo, our shared values, how we want to be known as
a company, and how we deﬁne our behaviors – theactions we must take and the talents we must
apply to our work.
The framework starts with a common purpose:• Creating an environment that energizes people“Every day, Gap Inc. honors the original reason forand encourages success. Our employees will drive

founding this company. We’re passionate that you

our continued success, and we’re working hard

be you. We make it easy for you to express yourto ensure that our culture supports and rewards

personal style throughout your life.”

the behaviors that represent what our company

Supporting our purpose are the values andwhich embody a collective spirit of exploration,

believes in — our Purpose, Values, and Behaviors,
behaviors that deﬁne who we are and how we work.

creativity and teamwork based on integrity, respect

We value integrity, respect, open-mindedness,and balance. We hold our leaders accountable for

quality, and balance, and we strive to behave

taking actions that are consistent with our values,

in ways that enable us to explore, create, andand for ensuring that their teams understand our

exceed … together.

expectations. In addition to recognition programsin our divisions and brands, we recently began

Of course, simply articulating the purpose, values,

rolling out our Purpose, Values, and Behaviors — anand behaviors of a company doesn’t change things

expansive initiative to share our values with all

overnight. We started the process of introducing

employees. We reached 35,000 employees in

our PVB framework across the entire company late2004, and are scheduled to reach all employees

last year, and we’re continuing throughout 2005.

worldwide by the end of 2005.

It’s a global undertaking requiring both training andleadership. Our leaders will be held accountable for

THE ROAD AHEAD

helping their employees live according to our

We are proud of what we’ve accomplished in ourvalues and for modeling our behaviors each andﬁrst 35 years, but we know more work lies ahead. As

every day.

we move forward, we will continue working closelywith our employees to create the kind of environment where they can build their careers and help us
achieve exceptional results.

Gap Inc. 2004 Social Responsibility Report

EMPLOYEES

45

Photo:Heather Schafer volunteers
at an event to give away
Gap jackets to children.
When Denver-area stores
were closed for renovations,employees volunteered
with local nonproﬁts while
continuing to receive pay.

With that in mind, we’re now reorganizing andstrengthening our volunteer program and putting moreresources behind the community projects in which ourstore and corporate employees are involved. Our primary focus, both for funding and for volunteerism, isunderserved youth, but we also encourage employees
to pursue the causes and issues that have the greatest meaning to them as individuals.

VOLUNTEERING AROUND THE WORLDIn 2004, Gap Inc. employees spent approximately
73,000 hours volunteering. Below are descriptions ofa few of the projects in which they participated. Ad-

community
involvement“I serve as a ‘job coach’ to help prepare teenagers
for the world of work. The youth are ready to embrace
new opportunities and responsibilities...I ﬁnd theexperience so rewarding that I always wonder whogets more out of it – the teens or me!”
Chase Perrett, Human Resources Supervisor, Old Navy

ditional examples can be found on www.gapinc.com.
Stollery Children’s Hospital (Edmonton, AB, Canada) —A team of employees has made an ongoing commitment to serve Stollery’s young patients and their families. Stollery provides complex and specialized services
such as cardiac surgery and organ transplants. Employees visit with patients, provide respite for caregivers and volunteer at Stollery’s fundraising events.
Breakthrough Collaborative (Hong Kong) — Mentors
in our Hong Kong sourcing ofﬁce spend two weekends
per month helping motivated, low-income students
improve their English skills.
Colorado in Action (Denver, CO) — For ten weeks inearly 2005, a number of Gap stores in Colorado wereclosed for renovations. During this period, store
employees remained on company payroll and divided

Since the Gap Foundation was established in 1977,

their time between training and volunteering withGap Inc.’s community outreach has taken many

nonproﬁts in the area. More than 60 community or-forms, including employee volunteer efforts, Gap

ganizations hosted Gap employees, who volunteered

Foundation grants, in-kind donations and consumer

nearly 10,000 hours.

promotions.
The Door (New York, NY) — During the academic
In 2004, we made $33 million in cash and in-kind

year, employees from 30 Old Navy, Gap and Banana

donations. We also stepped back to reassess the way

Republic stores taught a job readiness course to

we serve our communities. While ﬁnancial gifts andlow-income teenagers afﬁliated with The Door, an

product donations will remain an important part ofeducational and social services agency that serves

our outreach efforts, we realize that the contributions

7,500 adolescents per year.

we make through the time, talent and passion of ouremployees can be even more valuable.
46

COMMUNITY INVOLVEMENT

“Thanks to Community Corps, 2004 was a year thatchanged me forever. I helped build a home for a family
in need. The homeowner told us he and his family wereso blessed but I was thinking it was all of us who were
truly blessed to have been part of such a
wonderful experience.”
Kathleen Clarke, Customer Relations Specialist, Gap Inc.

We were pleased to see increases in employee

CONSUMER PROMOTIONS

participation both in volunteerism and ﬁnancial

Throughout the year, our brands partner with

contributions from 2003 to 2004 and look forward

charities and promote their causes through in-store

to even higher numbers in 2005.

customer promotions. During the 2004 holiday
season, Gap introduced “Share the Warmth,” a

04
20

r
Pa

n
tio
pa
i
tic

To
Co talnt Em
rib p
ut loy
io ee
ns
To
20
ta
03
Co l Ent m
rib plut oye
io e
ns
20
04

03
20

r
Pa

n
tio
pa
i
tic

Financial
Donations

8,105
8,822 $1,707,319
employees employees

Volunteer
Hours

3,882
7,766 21,965 hrs.
72,937 hrs.
employees employees
232% increase$2,752,972
61% increase

RECOGNIZING VOLUNTEERS

campaign featuring the GapKids character Brannan
the Bear. In November and December, a limited
edition Brannan the Bear clothed in a Gap Warmest
Jacket was available for sale online and in Gap,
GapKids and babyGap stores throughout North
America. 100 percent of proceeds went directly toproviding more than 73,000 Gap Warmest Jackets tochildren in need.

SOUTH ASIA TSUNAMI RELIEF EFFORTS

To encourage and support volunteers and toacknowledge that employees contribute in different

After the devastating earthquake and tsunami inways, our Gap Giving program matches employee

South Asia, Gap Foundation double-matched

contributions of both time and money. We also

employee contributions to designated agencies

recognize employees who have demonstrated awith a gift of $1.3 million. Gap Foundation pledgedcommitment to their communities through two

an additional $1 million to support immediate

unique programs:

relief and longer-term recovery in the impacted
communities, bringing the total contribution to $2.3

Community Corps takes teams of employees on

million. To encourage contributions from ourhomebuilding trips with Habitat for Humanity. To date,customers, our web sites featured a page wheremore than 300 employees have participated in thesecustomers could learn more about the disaster andtrips, and we’ve built 30 homes in the United States

how they could contribute to relief efforts. In

and Central America. Gap Foundation covers all trip

addition, Gap collaborated with Sarah Jessica

costs, including all expenses associated with building

Parker to create and sell a t-shirt with the message,

the homes.

“Send love around the world.” The proceeds fromt-shirt sales, which totaled $100,000, were donated

The Founders’ Award, as described on page 44, builds

to UNICEF for tsunami recovery efforts.

upon the philanthropic legacy of company founders
Doris and Don Fisher and recognizes employee commitment and partnership with a particular nonproﬁtagency or non-governmental organization.

Gap Inc. 2004 Social Responsibility Report

COMMUNITY INVOLVEMENT

47

environment,
healthand safety

We understand that our business affects theenvironment, as well as the health and safety of ouremployees and customers. In addition to maintaining
compliance with applicable laws and regulations,
our teams are constantly exploring ways to reduce
our impact on the environment, keep our workplaces
safe and ensure that our products can be enjoyedwith conﬁdence.

In addition to maintaining compliance with

ENVIRONMENT

applicable laws and regulations, we are

In 1999, we began implementing an environmental

constantly exploring ways to reduce ourto help ensure that we are consistently in compliancemanagement system in facilities we own and operateenvironmental impact, keep our workplaces

with local, state and federal regulations.

safe and ensure that our products can be

We have always believed, however, that our

enjoyed with conﬁdence.

We are currently working on a strategic plan toresponsibilities extend beyond legal requirements.
develop more environmentally friendly ways of doing
business. As part of this effort, last year we hired

Photo:
A worker in an Indian water
treatment facility ensures
the plant’s wastewater system is operating properly.

48

ENVIRONMENT, HEALTH AND SAFETYa consulting ﬁrm, CH2M HILL, to help us conduct ahigh-level assessment of our environmental impact ateach stage of our product lifecycle – from raw
materials to disposal of garments.

This assessment, which is summarized in the

We are also using our scale to encourage non-mer-illustration below, provided us with two important

chandise vendors to adopt more environmentally

insights. First, it conﬁrmed that we are alreadysound practices. In 2004, our brands began working

concentrating, as we should be, on the areas wherewith our corporate sourcing team to leverage ourwe have the greatest opportunities to make abuying power when purchasing print services fordifference: packaging use and disposal, energy

marketing materials. In choosing vendors, we not only

consumption, and waste and recycling. Second, itconsider price, but also look at factors such as the use

highlighted some of the serious sustainabilityof recycled content, the type of bleach and dyes used,challenges facing the garment industry as a whole.

and the vendor’s support for sustainable forestry. By
working with vendors who share our commitment inGoing forward, we will continue to focus on key

these areas, we hope to improve the environmental

areas where we have direct control, while also looking

attributes of the paper we purchase over time.

for opportunities to work with industry partners on
problems – such as water quality – that require

Energy Consumption

collaborative solutions. The following examples

We continue to reduce energy consumption in ourillustrate some of the progress we made in 2004.

U.S. stores. In 2004, our average energy consumption
decreased 2.4 percent from 2003 to 31.56 kilowatt

Packaging Use and Disposal

hours per square foot. On a per square foot basis,

As a service to our customers, Old Navy stores began

we have achieved a 27 percent reduction since 2001.

selling garments on size-speciﬁc hangers in 2003.

We will continue to look for additional energy

Last year, after realizing that fewer customers thanconservation opportunities in the coming year.

expected were taking hangers home, we began

04
20

20

02

01
20

easier to recycle. We are now changing their

03

AVERAGE STORE ENERGY CONSUMPTION

that by redesigning the hangers, we could make them

20

exploring ways to recycle or reuse them. We found

6

.3
32

31
.5

.2
38

5

.2
43

9

later this year.

6

kWh/ft2

composition and plan to pilot a recycling program

OUR IMPACT ON THE ENVIRONMENT
In 2004, we worked with CH2M HILL to assess our environmental impact throughout the product life
cycle. We’ve conﬁrmed that, in the short term, we should focus our efforts on the areas over which wehave direct control and, therefore, the biggest opportunity to make a difference.
INFLUENCE

DIRECT CONTROLWEAK/NO CONTROLINPUTS

Water, pesticides,
fertilizers, dyes,
energyFuel, water,
chemicals

Fuel, corrugate,
plastic

Energy, wood,other construction
materials

PROCESS

Raw Materials
and Textile
Production

Garment
Production

Transportationof Goods

Store and Facility
Construction

Store Operations(including
packaging)Consumer Use
and Disposal

OUTPUTS

Emissions, waste,
runoff (wastewater)

Emissions,wastewater, waste

Emissions,maritime waste

Emissions, waste

Emissions, waste

Emissions, waste

Gap Inc. 2004 Social Responsibility Report

Energy, corrugate,
plastic

Energy, water,
dry cleaningchemicals

ENVIRONMENT, HEALTH AND SAFETY49

Water Quality
To create the washes and rinses customers desire,denim products go through an extensive dyeing andtreatment process that often involves chemicals. If
left untreated, wastewater discharged from denim
laundries can adversely affect the environment andthe communities in which laundries operate.
We know how important it is to protect the world’s
Photo:
Proper wastewater
management requires that
efﬂuent go through various
stages of treatment before
it is discharged.

In last year’s report, we announced that we joined

water supply, but our experience has shown us that

the U.S. Environmental Protection Agency's (EPA)

improving water quality is a complex challenge that

Climate Leaders program, which works with compa-

often requires experimentation and collaboration.

nies to reduce their greenhouse gas emissions on a
voluntary basis. In 2004, we worked with the EPA’s

After several attempts to implement water qual-

consultant, Econergy, to develop our Climate Leaders

ity programs in the past, we partnered with CH2M

baseline inventory using our energy consumption

HILL in 2003 to re-launch a pilot program designed

data for 2003. This is an important ﬁrst step into measure denim laundries efﬂuent against Busi-developing our Climate Leaders goals and measuring

ness for Social Responsibility’s (BSR) Water Quality

our progress over time.

Guidelines. In 2004, we selected 20 laundries in 10
countries to participate in this program, with the

Waste and Recycling

ultimate goal of including all laundries that work on

A number of our environmental programs focus on

our products.

reducing waste generated by our operations. We arealways looking for ways to eliminate, reuse or recycle

Four of the 20 participating laundries failed to meetpotential waste.

BSR’s strict standards. In three of these cases, wewere able to prescribe corrective measures because

Cardboard is a major source of waste for many

the factories discharge directly into water systems.

retailers, including Gap Inc. In the ﬁrst half of 2004,

The fourth case, however, was not so simple because

our Logistics division evaluated opportunities tothe laundry legally discharges into a Publicly Owned

reduce, reuse and recycle the cardboard boxes used

Treatment Works (POTW), whose policies we cannot

to transport products to our stores. The amount of

inﬂuence. We are now working with the BSR Apparelcardboard that was reused or recycled varied greatly

Water Quality Working Group to explore ways toamong our 13 distribution facilities, with someextend our reach beyond facilities directly involved inreusing up to 77 percent of their boxes. In 2004, we

producing our garments and to improve standards inestimate that we reused more than 10 million boxes

POTWs that do not meet our expectations.

and recycled 38,000 tons of cardboard and paper.
Still, we know we can do better. This year, we are

HEALTH AND SAFETY

encouraging all distribution centers to increase reuse

We are committed to protecting our employees andof their boxes, which could cut our cardboard supply

customers through the enforcement of workplacein half and save the company an estimated $3.5

safety protocols and thorough product testing.

million annually.

Workplace Health and Safety

50

In the cafeterias at our San Francisco Bay Area

In 2004, we reduced our worker injury rate by 9

headquarters ofﬁces, we have introduced a compost-

percent relative to 2003, with 4.43 injuries per 200,000

ing program through which we divert approximately

hours worked. While pleased with this reduction, we

19,000 pounds of waste from landﬁlls each month.

continue to explore better processes and stricter

This waste is instead turned into nutrient-rich topsoil.

enforcement of safety protocols in all of our facilities:

ENVIRONMENT, HEALTH AND SAFETY

Retail Stores — Our Risk Management department

Our product quality and safety standards meet or

partners with other corporate departments andexceed the requirements of the most stringent

store employees to improve the store experience byproduct legislation in the markets where we sell

identifying and mitigating potential safety concerns.

products. We require that products be tested forsafety and regulatory compliance prior to reaching

Distribution Centers — To reduce the number ofour stores. We work with independent consumer

workplace injuries in our distribution centers, we

product testing laboratories to advise us on productmaintain comprehensive safety programs and follow

standards and conduct product testing in theirrigorous ﬁre protection standards.

facilities. Our testing protocols cover a wide rangeof product characteristics, including small parts orOfﬁces — Since musculoskeletal injuries arechoking hazards, mechanical hazards such as

the most common type of ofﬁce injury, we have a

sharp points on trims, and ﬂammability of fabrics.

trained team of ergonomic representatives to help
employees create a comfortable and productive

Because consumer safety and conﬁdence in ourwork environment.

products is of the highest priority, we invest substantial resources in establishing and reﬁning standards,

Product Integrity

procedural controls, and checks and balances toMore than 30 full-time employees across the world

guard against product failures.

are directly responsible for ensuring that our
products meet strict quality and safety standards

Cruelty-Free Personal Care Products

throughout the product pipeline, from concept

Like our garments, Gap Inc. personal care products

through production. This team also provides training

such as perfumes, lotions and sunscreens undergo

to others who are in a position to inﬂuence productrigorous testing. We do not, however, permit testing

safety or compliance.

on animals, and require that our manufacturers
refrain from this practice as well.

WORKPLACE HEALTH AND SAFETY
Retail Stores

All Other Locations

Total

2003

20042

2003

20042

2003

20042

No. of Gap Inc. Business
Partners (Employees)

111,853

117,063

42,83445,950154,687

163,013

Workers’ Comp. Claims

2,734

2,650

2,431

361

303

3,011

Time Loss Claims1

756

570

115

34

871

604

Hours of Exposure

109,160,518

107,193,309

14,823,605

16,297,716

123,984,123

123,491,024

4.86

4.54

4.87

3.72

4.86

4.43

0.54

0.55

1

Rate of Injury per 200,000
Hours Worked
Experience Modiﬁcation
Factor3

1 Claims data represent domestic locations.
2 Claims data for ﬁscal year 2004 may change as new claims may be ﬁled after the ﬁscal year end or reopened for prior year injuries.
3 The Experience Modiﬁcation Factor is an assigned rate that compares the number and cost of a company’s Workers’ Compensation claims withthose of peer companies in their industry. A rating of “1.0” represents average performance for the industry. Gap Inc.’s rating of 0.55 is lower
and, therefore, better than the industry average.

Gap Inc. 2004 Social Responsibility Report

ENVIRONMENT, HEALTH AND SAFETY

51

STATEMENT FROM THE PUBLIC REPORTING WORKING GROUP
Corporations like Gap Inc. stand in a critical place in

As Gap’s new compliance database becomes

the world. Global supply chains take companies into

operative, we expect future reports to provide

nearly every corner of the developing world, placing

additional speciﬁc and aggregate data to assessthem in the position of buyer, mediator and laborfactory performance while relating the data torights consultant. Because Gap earns substantial

systemic issues. We would like to see a future

revenues from its global supply chain, it bears

report highlight the state of the U.S. garment

important responsibility for workers who

industry. We encourage Gap to broaden the scope

manufacture its products. It has an opportunity toof its reporting to address the full range ofimprove the lives of thousands of individuals by

issues covered by the Global Reporting Initiative

its responsible actions.

(GRI). We look forward to comparable reports
from other companies.

We believe that Gap has made substantial progressin focusing on the connections between its core

We hope that this report will deepen

business, systemic global concerns and workers’

dialogue among corporations, consumers andlives. We commend Gap for recognizing that brands

investors – all of us who are players in this global

and retailers contribute to poor working conditions

system – about the impact of our decisions on thethrough unreasonable expectations regarding

lives of those who do not have the luxury to invest

speed of delivery and cost, inefﬁcient purchasingor to change their wardrobe every season. This

practices, and inconsistent labor standards andis the broader dialogue that socially responsiblemeans of enforcement. Simple changes in sleeve

investing seeks to foster.

length or shirt color can drive unreasonableconditions on the factory ﬂoor as workers arepushed to meet changing demands.

Adam Kanzer, Esq., General Counsel and Director
The information provided in this report – speciﬁcof Shareholder Advocacy, Domini Social Invest-

data points, plus frank discussion of the systemic

ments LLC

issues driving recurring problems – can empowerboth investors and consumers to make more
responsible choices. We must also recognize that
Wall Street’s narrow focus on quarterly earnings

Alya Z. Kayal, Esq., Manager of Research andcontributes to the problem.

Policy, Calvert Group Ltd.

This report touches on Gap’s response to the
expiration of the Multi-Fiber Arrangement (MFA) –a signiﬁcant shift in the global supply system that

Conrad MacKerron, Director, Corporate Social

can have devastating consequences in some

Responsibility Program, As You Sow Foundation

developing economies. We encourage Gap to share
more information about its approach, while
continuing to work with others to mitigate the

Ruth Rosenbaum, TC, Ph.D., Executive Director,

impact of this shift.

Center for Reﬂection, Education and Action (CREA)David M. Schilling, Director, Global Corporate
Accountability Program, Interfaith Center on
Corporate Responsibility
52

STATEMENT FROM THE PUBLIC REPORTING WORKING GROUPGRI Index / U.N. Global Compact Index
The Global Reporting Initiative’s (GRI) Sustainability

It is important to note that GRI and the Global Com-

Reporting Guidelines provide a consistent framework

pact do not yet encompass some of the most material

for reporting on general economic, environmental

issues in the apparel industry – in particular, man-and social indicators. They serve as a useful tool foragement of human rights issues and labor standards

readers to compare performance over time, as wellwithin supply chains. As a result, we have included a

as between companies. Similarly, the principles ofsigniﬁcant amount of data and other information in

the U.N. Global Compact outline a set of criteria

this report about our ethical sourcing practices thatagainst which member companies can assess

go beyond the GRI and Global Compact guidelines.

their performance.
We believe that greater standardization of reporting
We have included the following index in this year’sis critical to promoting transparency and account-report because we see both GRI and the Global

ability within our industry. It is also an important stepCompact principles as informative frameworks in our

towards ensuring that human rights are broadly

evolving approach to CSR. While we have not been

respected throughout supply chains. To this end, weable to report against every indicator or principle, weare participating in GRI’s working group to develop

hope to expand our reporting as our CSR policies andspeciﬁc reporting indicators for the apparel and foot-programs become more developed.

wear sectors. For more information, please see page 37.

GRI INDICATOR

U.N. GLOBAL COMPACT PRINCIPLEREPORT SECTION1

PAGE(S)

Vision and strategy for sustainable development
Statement from the CEO

Not applicableNot applicable

Forging Sustainable Solutions
Letter from Paul Pressler

8-11
2-3

2.1
2.2
2.3
2.4
2.5

Name of reporting organization
Major products, services, and brands
Operational structure
Description of major divisions
Location of Gap Inc. operations

Not applicableNot applicableNot applicableNot applicableNot applicable

4-5
4-5

2.6
2.7
2.8
2.9

Nature of ownership
Nature of markets served
Scale of reporting organization
Key stakeholders

Not applicableNot applicableNot applicableNot applicable

2.10
2.11
2.12
2.13
2.14
2.15
2.16

Contact person for report
Reporting period
Date of previous report
Reporting boundaries
Signiﬁcant organizational changes
Basis for reporting on joint ventures
Explanation of re-statements of information
provided in earlier reports
Decisions not to apply GRI principles
Criteria/deﬁnitions used

Not applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicable

FY2004 in Review
FY2004 in Review
Form 10-K2
FY2004 in Review
Regional Breakdown of Apparel Sourcing Countries
Form 10-K2
Form 10-K2
Not reported
Form 10-K2
Forging Sustainable Solutions
Progress Through Partnerships
Forging Sustainable Solutions
About This Report
About This Report
About This Report
Not applicableNot applicableNot applicableNot applicable

2.20

Signiﬁcant changes in measurement methods
from previous years
Policies and practices to provide assurance

2.21
2.22

Independent assurance for report
Obtaining additional information

Not applicableNot applicable

Vision & Strategy
1.1
1.2

Proﬁle

2.17
2.18

2.19

Not applicableNot applicableNot applicable

GRI Index/U.N. Global Compact Index
Forging Sustainable Solutions
The Art of Factory Monitoring
Glossary
Not applicable

4-5
6-7

8-11
34-41
11
58
58
58

53
8-11
14-25
56-57

Gap Inc. Assessment and Recommendations (SAI)26
Gap Inc. Program and Training Needs Assessment (Verité)
27
Progress Through Partnerships
34-41
Public Reporting Working Group Statement
52
About This Report58
Not reported
Forging Sustainable Solutions
11

1 Due to space constraints, this report does not include all available information corresponding to certain GRI indicators. Where relevant, this index provides links to the company website where more information can be found.
2 Form 10-K refers to the company’s 2004 Form 10-K, ﬁled on March 28, 2005 with the Securities and Exchange Commission.
Gap Inc. 2004 Social Responsibility ReportGRI INDEX/ U.N. GLOBAL COMPACT INDEX

53

GRI INDICATOR

U.N. GLOBAL COMPACT PRINCIPLEREPORT SECTION1

Gap Inc. governance structure
Percentage of independent, non-executive directors
Process for determining Board member expertise
Board-level identiﬁcation and management of risk
Executive compensation and company goals
Organizational structure for economic,
environmental, and social policies
Mission and values statements, internallydeveloped codes of conduct

Not applicableNot applicableNot applicableNot applicableNot applicableNot applicable

Form 10-K2
Form 10-K2
Not reported
Not reported
2005 Proxy Statement
Not reported

Not applicableMechanisms for shareholders to provide
recommendations
Identiﬁcation and selection of major stakeholders
Stakeholder consultation

Not applicable

The Art of Factory Monitoring
Employees
Gap Inc. Code of Business Conduct
Not reported

PAGE(S)

Governance Structure & Management Systems
3.1
3.2
3.3
3.4
3.5
3.6
3.7

3.8
3.9
3.10

Not applicableNot applicable

3.11/12 Information generated from stakeholder
consultations and its use

Not applicable

3.13

Principle 7: Businesses should support aprecautionary approach to environmental
challenges
Not applicable

Precautionary principle

3.14

Voluntary principles and other initiatives to which
Gap Inc. subscribes or endorses
3.15
Principle memberships
3.16/17 Managing upstream and downstream impacts
3.18
Major decisions on operational changes
3.19
Programs and procedures pertaining to economic,
environmental, and social performance

3.20

Certiﬁcation of management systems

22-23
45

Progress Through Partnerships
34-41
Gap Inc. Assessment and Recommendations (SAI)26
Gap Inc. Program and Training Needs Assessment (Verité)
27
Progress Through Partnerships
34-41
Statement from the Public Reporting Working Group
52
2004-06 Goals
12-13
Gap Inc. Assessment and Recommendations (SAI)26
Gap Inc. Program and Training Needs Assessment (Verité)
27
Progress Through Partnerships
34-41
Statement from the Public Reporting Working Group52
Not reported

Progress Through Partnerships

34-41

Not applicable

Progress Through Partnerships
Integrating Labor Standards into Our Business Practices
Integrating Labor Standards into Our Business Practices
Global Map of Initiatives
Forging Sustainable Solutions
The Art of Factory Monitoring
Integrating Labor Standards into Our Business Practices
Progress Through Partnerships
Employees
Community Involvement
Environment, Health and Safety
Integrating Labor Standards into Our Business Practices

34-41
28-33
28-33
6-7
8-11
14-25
28-33
34-41
42-45
46-47
48-51
30

Not applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicable

FY2004 in Review
Form 10-K2
Not reported
Not reported
Not reported
Form 10-K2
Form 10-K2
Form 10-K2
Not reported
FY2004 in Review
Regional Breakdown of Apparel Sourcing Countries

Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility

Not reported

Not applicableNot applicableNot applicableNot applicable

Economic Performance Indicators
EC1
EC2
EC3
EC4
EC5
EC6
EC7
EC8
EC9
EC10
EC11

Net sales
Geographic breakdown of markets
Cost of materials purchased
Contracts paid by agreed terms
Total payroll and beneﬁts
Distribution to capital providers
Increase/decrease in retained earnings
Total sum of taxes paid
Subsidies received
Community donations
Supplier breakdown

4

5
6-7

Environmental Performance Indicators3
EN1

Total materials use

EN2

Percentage of waste materials used

EN3

Direct energy use

EN4

Indirect energy use

EN5

Total water use

EN6

Biodiversity-rich habitats

EN7

Biodiversity impacts

EN8Greenhouse gas emissions

EN9

Use and emissions of ozone-depleting substances

EN10

NOx, SOx, and other air emissions

Not reported
Environment, Health and Safety49

Not reported
Not reported
Not reported
Not reported
Not reported
Not reported
Not reported

3 We recognize that our reporting against GRI environmental indicators is particularly limited this year. Still, we have included this section in the index because we see the GRI indicators
as a helpful framework to help evolve our environmental program, and we hope to be able to report more information in future reports.
54

GRI INDEX/ U.N. GLOBAL COMPACT INDEXGRI INDICATOR

U.N. GLOBAL COMPACT PRINCIPLEREPORT SECTION1

Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 8: Businesses should undertake initiatives
to promote greater environmental responsibility
Principle 9: Businesses should encourage thedevelopment and diffusion of environmentallyfriendly technologies

Environment, Health and Safety

PAGE(S)

Environmental Performance Indicators, continued
EN12

Signiﬁcant discharges to water

EN13

Signiﬁcant spills

EN14

Environmental impact of products and services

EN15

Reclaimable product after useful life

EN16

Incidents and ﬁnes for environmental
non-compliance
Initiatives to use renewable energy sources
and to increase energy efﬁciency

EN17

50

Not reported
Environment, Health and Safety49

Not reported
Not reported
Environment, Health and Safety

48-51

Social Performance Indicators
LA1
LA2
LA3

LA5
LA6
LA7
LA8
LA9
LA10

Breakdown of workforce
New employment creation and average turnover
Employees represented by independent
trade union organizations
Policy and procedures relating toemployee consultation
Occupational accidents and diseases
Formal joint health and safety committees
Injury, lost day, and absentee rates
Polices or programs on HIV/AIDS
Average hours of training per employee
Equal opportunities policies, programs, and systems

LA11

Composition of senior management

LA12
HR1

Employee beneﬁts beyond those legally mandated
Policies and procedures on human rights

HR2

Evidence of human rights consideration inbusiness decisions

HR3

Policies and procedures to address human rights
performance within supply chain

HR4

Policy, procedures, and monitoring to prevent
discrimination

HR5

Policy, procedures, and monitoringon freedom of association

HR6

Policy, procedures, and monitoring on child labor

HR7

Policy, procedures, and monitoring on forced labor

SO1

Policy, procedures, and monitoring on
community impact
Policy, procedures, and monitoring on bribery
and corruption
Policy, procedures, and monitoring on politicallobbying and contributions
Awards received for social, ethical andenvironmental performance
Policy, procedures, and monitoring to preventanti-competitive behavior
Customer health and safety in product use

LA4

SO2
SO3
SO4
SO7
PR1
PR2
PR3

Policy, procedures, and monitoring on productinformation and labeling
Policy, procedures, and monitoring on
consumer privacy

Gap Inc. 2004 Social Responsibility Report

Not applicableNot applicableNot applicableNot reported
Not reported
Not reported

Not applicableNot reported

Not applicableNot applicableNot applicableNot applicableNot applicablePrinciple 6: Businesses should support theelimination of discrimination in respect of
employment and occupation
Principle 6: Businesses should support theelimination of discrimination in respect of
employment and occupation
Not applicablePrinciple 1: Businesses should support andrespect the protection of internationally proclaimed
human rights
Principle 2: Businesses should make sure that they
are not complicit in human rights abuses
Principle 1: Businesses should support andrespect the protection of internationally proclaimed
human rights
Principle 2: Businesses should make sure that they
are not complicit in human rights abuses
Principle 2: Businesses should make sure that they
are not complicit in human rights abuses

Environment, Health and Safety
Not reported
Environment, Health and Safety
Global Map of Initiatives
Not reported
Gap Inc. Code of Business Conduct

Principle 6: Businesses should support theelimination of discrimination in respect of
employment and occupation
Principle 3: Businesses should uphold freedomof association and the effective recognition of theright to collective bargaining
Principle 5: Businesses should support the effective
abolition of child labor
Principle 4: Businesses should support theelimination of all forms of forced and compulsory
labor
Not applicable

51
51
7

Form 10-K2

Employees
The Art of Factory Monitoring
Integrating Labor Standards into Our Business Practices
Progress Through Partnerships

44-45
14-27
28-33
34-41

The Art of Factory Monitoring
Integrating Labor Standards into Our Business Practices
Progress Through Partnerships

14-27
28-33
34-41

Forging Sustainable Solutions
The Art of Factory Monitoring
Integrating Labor Standards into Our Business Practices
Progess Through Partnerships
The Art of Factory Monitoring
Employees
Gap Inc. Code of Business Conduct
The Art of Factory Monitoring
Employees

8-11
14-27
28-33
34-41
14-27
42-43
14-27
42

The Art of Factory Monitoring

18, 21-23

The Art of Factory Monitoring

18, 21-23

Not reported

Principle 10: Businesses should work against all
forms of corruption, including extortion and bribery
Not applicable

Gap Inc. Code of Business Conduct

Not applicableNot reported

Not applicable

Gap Inc. Code of Business Conduct

Not applicable

Environment, Health and Safety

Not applicableNot reported

Not applicableNot reported

Gap Inc. Code of Business Conduct

43

GRI INDEX/ U.N. GLOBAL COMPACT INDEX

51

55

GlossaryBusiness Coalition for Capacity Building (BCCB)

Ethical Trading Initiative (ETI)

A private, cross-industry coalition of companies that

An alliance of companies, NGOs, and trade union

works with governments, international organizationsorganizations committed to working together toand civil society to advocate for effective capacity-

identify and promote ethical trade. For morebuilding in the developing world.

information, visit www.ethicaltrade.org.

Business Leaders Initiative on Human Rights (BLIHR)

Freedom of association

A program that assists the private sector to further

As deﬁned in the Gap Inc. Code of Vendor Conduct,

integrate human rights standards into businessthe right of workers to lawfully join associations ofpractices and policies. For more information, visit

their own choosing, peacefully associate, organize or

www.blihr.org.

bargain collectively.

Business for Social Responsibility (BSR)

Global Compliance

A global organization that helps member companies

The Gap Inc. department responsible for enforcing

achieve success in ways that respect ethical values,

the company’s Code of Vendor Conduct in thepeople, communities and the environment. For moremanufacturing facilities that produce its apparel andinformation, visit www.bsr.org.

for stakeholder engagement in the area of labor

CH2M HILL

standards and working conditions.

A multinational ﬁrm providing engineering, construc-

Global Reporting Initiative (GRI)

tion, operations, communications, security, environ-

A multi-stakeholder process and independent institu-

mental, and related services to public and privatetion whose mission is to develop and disseminate

clients in numerous industries. For more information,

globally applicable sustainability reporting guidelines.

visit www.ch2m.com.

For more information, visit www.globalreporting.org.

Climate Leaders

Homeworkers

A voluntary U.S. Environmental Protection Agency in-

Garment workers who work in their homes or villages

dustry-government partnership that works with com-due to social, cultural and economic reasons.

panies to develop a comprehensive climate change

Hong Kong Productivity Council (HKPC)

strategy. Partners complete an annual greenhouse

A multidisciplinary organization established by

gas inventory and set a long-term goal to reduce

statute in 1967 to promote increased productivity andemissions.

the use of more efﬁcient methods throughout Hong

Code of Business Conduct

Kong’s business sectors. For more information,

Gap Inc.’s internal ethics code which governs businessvisit www.hkpc.org.

practices and is designed to help the company and its

Impactt

employees avoid conﬂicts of interest, achieve compli-

A U.K.-based consultancy group that works withance with laws, and protect company assets, including

companies, organizations and individuals to develop

employees and properties.

business practices which extend the number of people

Code of Vendor Conduct (COVC)

who beneﬁt from international trade and investment.

Basic requirements set forth by Gap Inc. that all

For more information, visit

manufacturers and factories must be able to meet inwww.impacttlimited.com.

order to do business with the company. The Code provides the foundation for Gap’s ongoing evaluation of amanufacturer’s employment practices and environmental compliance.

56

GLOSSARYIndependent monitoring

Quota

Ongoing monitoring of working conditions conducted

A restriction on an export category such as thoseby local nonproﬁt, civil society organizations at theestablished by the Multi-Fiber Arrangement forrequest of companies or international organizations.

textiles and garments. This particular quota system

Independent monitoring groups usually report theirwas lifted on January 1, 2005.

ﬁndings publicly.

Social Accountability International (SAI)International Labour Organization (ILO)

A nonproﬁt organization dedicated to the development,

The U.N. specialized agency that seeks the promotion

implementation and oversight of voluntary, veriﬁableof social justice and internationally recognized laborsocial accountability standards. SAI developed therights. For more information, visit www.ilo.org.

SA8000 standard, which covers all widely accepted

Joint Initiative on Corporate Accountability

international labor rights and requires a factory-level

and Workers' Rights

management system to ensure ongoing improvement.

A collaboration between six multi-stakeholder

For more information, visit www.sa-intl.org.

organizations to work with garment manufacturers

Sourcingwith the aim of developing a common code of factory

The process by which Gap Inc. selects and places or-labor standards and consistent methods ofders with manufacturers around the world to produce

implementation and monitoring. For more

the merchandise sold in its stores.

information, visit www.jo-in.org.

Stakeholders

Multi-Fiber Arrangement (MFA)

Individuals and groups including NGOs, unions,

An internationally negotiated system of quotas on

governments, suppliers, shareholders and employees

textile and apparel outside the rules set out in the

who have a vested interest in the way companies

General Agreement on Tariffs and Trade (GATT) which

conduct their business.

allowed importing signatory countries to apply quan-

Uniform code of conduct

titative restrictions on textile imports when they con-

A standard code of vendor conduct used acrosssidered them necessary to prevent market disruption,

an industry. This is a goal of many multi-stakeholder

even when such restrictions were otherwise contrarygroups.

to GATT rules. Under the Uruguay Round agreement,

Vendor Compliance Ofﬁcer (VCO)

MFA quotas were phased out at the end of 2004.

A member of Gap Inc.’s Global Compliance department

Non-governmental organizations (NGOs)

who monitors working conditions of manufacturers

National, international and community-based groups

producing goods for the company.

that raise awareness about social, environmental,

Verité

community and human rights issues.

An independent, nonproﬁt social auditing and research

Public Reporting Working Group

organization whose goal is to ensure that people

A group of stakeholders with whom Gap Inc. hasworldwide work under safe, fair and legal working

worked since late 2002 to explore opportunities forconditions. For more information, visit

greater transparency and increased sustainability of

www.verite.org.

our work. This working group is comprised of Domini
Social Investments (www.domini.com), the Calvert
Group (www.calvertgroup.com), the As You Sow
Foundation (www.asyousow.org), the Center for
Reﬂection, Education and Action (www.crea-inc.org),
and the Interfaith Center on Corporate Responsibility(www.iccr.org).

Gap Inc. 2004 Social Responsibility Report

GLOSSARY57

ABOUT THIS REPORT
Scope —This report discusses Gap Inc.’s domestic and international operations and addresses our efforts
in the areas of supply chain labor standards, employees, community involvement and the environment, healthand safety. For information on corporate governance, please visit www.gapinc.com.
Reporting Year — Data included in this report reﬂect activities during Gap Inc.’s ﬁscal year 2004
(February 1, 2004, through January 31, 2005), unless otherwise noted.
Previous Report — Gap Inc.’s 2003 Social Responsibility Report is available online at www.gapinc.com.

Reporting Assurance
While we continue to explore more formal procedures, we believe that candid feedback from a broad rangeof stakeholders is currently the best way to ensure the accuracy and relevance of the information we report.
The assurance process used in the development of this report included the following:• Stakeholder Outreach Sessions — In Fall 2004, we convened two outreach sessions—one in Washington, D.C.
and the other in London—to solicit feedback on our programs and our approach to reporting.
• External Program Veriﬁcation — We invited SAI and Verité to examine our Global Compliance program andhave included summaries of their assessments in this report (pp. 26-27).
• Public Reporting Working Group — Members of our Public Reporting Working Group (p. 52) have beenworking with us since late 2002 to develop our reporting procedures and drive greater levels of transparency
in our communications.

Global Reporting Initiative
Although we are not in full accordance with the GRI Sustainability Reporting Guidlines, we view its principles andindicators as tools that will help us evolve our programs. Please see the appendix for a full list of GRI
indicators and the sections of this publication in which they apply.

This report is printed on New Leaf Reincarnation Matte, made with 100% recycled ﬁber, 50% post-consumer
waste, processed chlorine-free. By using this environmentally friendly paper, Gap Inc. saved the following
resources:85
18,449
38
4,036
6,820

fully grown trees
gallons of water
million BTUs of energy
pounds of solid waste
pounds of greenhouse gases

Production of the Report
For the production of this report, we selected an environmentally responsible printer that has a “zero landfill” policy,
recycles all process material waste and has an enclosed printing facility with negligible fugitive emissions.
This report was printed in the U.S.A. on 100% recycled ﬁber.
Design: O&J Design, Inc.
Photography: Pages 1, 14, 28, 50 photos © 2004 Luis Ascui; Pages 16, 40 photos © 2004 Sacha Dean Biyan; Page 47
photo © 2004 Rob Brodman; Page 8 photo © 2004 Bret Bussey; Pages 25, 27, 31, 34, 36 photos © 2004 Katarina Hesse;
Page 2 photo © 2004 Ted Kawalerski; Cover, Pages 38, 48 photos © 2004 Tom Pietrasik; Page 20 photo © 2004 Brent
Stirton; Page 17 photo © 2005 P7 Professional Photography; Page 46 photo © 2005 Chris Takagi.
Printing: Lithographix, Inc.

© Gap Inc. 2005

58

ABOUT THIS REPORT

“Project Swabhiman has helped me through personal
difﬁculty. I learned a new skill — handwork which will
be beneﬁcial for me in the future — and I am earningmoney and have a bank account which helps me insaving money.”
Anita, 20 years old

On the cover: Women embroidering Old Navy shirts at the Project Swabhimansocial welfare home, Delhi, India, February 2005.
Founded in 2003 with support from Gap Inc., Project Swabhiman is a joint effort with
the Delhi government’s Social Welfare Department and two local Non Governmental Organizations, Nav Jyoti and Partners in Change, to help women who have been
victims of domestic violence.
The program offers participants shelter, support services and job training, and provides them with a clean and safe work environment in which the intricate garment
handwork the region is known for can be produced under ethical conditions.
The name “Swabhiman” was chosen by the women participating in the project. It is
Hindi for “self respect, self pride and dignity.”GAP INC.
2004 SOCIAL RESPONSIBILIT Y REPORTTwo Folsom Street
San Francisco, CA 94105
www.gapinc.com

facing challenges
ﬁnding opportunities
2004 SOCIAL RESPONSIBILIT Y REPORT