Our Futures
Are Woven
TogetherGlobal Sustainability Report 2013 – 2014

Our Futures Are Woven Together

Contents

Strategy
CEO Letter

01

Highlights

04

Our Sustainability Strategy

05
Goals & Progress

11

Assessing Materiality

14

Engaging Stakeholders

16

Ensuring Strong Governance17

Acting Ethically18

Managing Risks

19

Mapping our Supply Chain

20

PeopleImproving Factory Working Conditions
Respecting Human Rights

28

Driving Business Integration

41

Partnering with Factories

44

Collecting Better Data

54

Building New Collaborations

56

Designing Country Strategies

57

Working for Greater Equality & Opportunity

Gap Inc. | Global Sustainability Report |23

62

Advancing Careers

67

Embracing Diversity & Inclusion

70

Caring for Our Employees

75

Improving Hourly Scheduling

77

Working Safely

78

Listening to Employees

79

Building Stronger Communities

80

Gap Inc. P.A.C.E. – Changing One Million Lives

87

Table of Contents

Environment
Protecting Our Shared Environment

93

Doing Our Part on Climate

97
Collaborating for Change

99

Hunting for Energy Savings

101

Improving Lighting & Shipping

101

Diverting Waste

103

Creating Solutions for Women + Water
Reducing Impacts at Fabric Mills

110

Addressing the Impacts of
Our Supply Chain

111

Appendix

113
About this Report
Public Reporting Working
Group Statement

Additional Information available at gapinc.com/sustainability
Global Reporting Initiative (GRI)
G4 Content Index
Data Tables
Other Resources:
Policies, Partnerships,
Sourcing Countries

Published January 2016

Gap Inc. | Global Sustainability Report |Table of Contents

104Gap Inc. CEO Art Peck volunteering at Boys & Girls Clubs of San Francisco

Letter From Our CEO
Anyone who has spent time with me at Gap Inc. knows that I’m obsessedwith product. Design. Craftsmanship. Texture and color. The smallest
details. All of it matters and adds up to something beautiful, enticing andsuggestive of a bigger story.
What that story is, however, can be tough to know at first glance.
Was a shirt or jacket sewn by someone who works in safe and fair conditions? Was caretaken to mitigate any potential environmental harm caused by the manufacturing process?
Were the people whose lives were touched by the creation of a piece of clothing affected
in a positive way?
I’m convinced that this part of the story matters – and will come to matter even more in
the future. Products that are disconnected from people will leave people feeling, well,
disconnected. And retail is nothing if it is not about emotion.
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1Part of what is so intriguing to me about our company is that our story is still evolving, andwe have a great opportunity to shape it. Frankly, I’m not satisfied with where the apparelindustry, including Gap Inc., is today on a variety of social and environmental issues. Manytimes, creating change feels frustratingly slow. Yet change is more urgent now than ever,for all of us. We face global challenges that require collective action. People everywhere
rely on vital resources like water to live; our company, too, can’t survive without a healthy
environment. Likewise, we know that we can only thrive in a world in which all people
have the chance to do the same. This sense of connection is what encourages me thatchange is not just possible, but imperative – our futures are tied together, and we can’t
afford not to act.

Change is not just possible, but imperative – our futures
are tied together, and we can’t afford not to act.
We don’t pretend to have all the answers, but I have personally experienced what we
can make happen as one of the world’s largest apparel retailers. Over the past few years,
we raised the hourly wage for more than 60,000 Gap Inc. employees, a step we hoped
would help individual people while also sparking broader change – and in fact, otherretailers followed suit. In September 2015, we announced our commitment to expand
our P.A.C.E. program to educate one million women throughout the world by 2020. We
started P.A.C.E. to help the women who make our clothes gain the skills and confidence
to advance at work and at home, and it is both exciting and humbling to set a goal to reach
women on a much greater scale.
At the same time, in some areas our story does not yet align with our aspirations. A casein point is the environment. We have more to do to address critical issues across ourbusiness operations. To spur our progress, we have set two ambitious goals that we areannouncing with this report: by the end of 2020, we commit to a 50 percent absolute
reduction of greenhouse gas (GHG) emissions in our owned and operated facilities globallyfrom 2015 levels, and to 80 percent waste diversion from landfill for our U.S. facilities.
We also know that while we have made progress when it comes to improving working
conditions inside factories, we still face challenges in ensuring the safety and well-beingof the people who make our clothes. Over the past few years, we have been reassessing
and redesigning our approach to how we can catalyze improvements.

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2Our new partnership with Verité, which focuses on measuring and improving the degree towhich garment workers feel valued and engaged at work, is a prime example, and we aim
to create other innovative approaches as we move forward.
I fully expect that we will be judged by our actions, but the heart of our story lies in ourcommitment. We’re not perfect, but what I can say without hesitation is that we arecommitted to this work. We’re striking up new partnerships, investing in new strategies
and testing new ideas. We believe we have a real opportunity to make a difference inpeople’s lives through our business.

We don’t pretend to have all the answers, but I havepersonally experienced what we can make happen as
one of the world’s largest apparel retailers.
While the fashion industry has its challenges, it is also full of promise. The beauty of apiece of clothing can extend outward to touch people and the world in ways that are far
from obvious. This potential is what drew me to Gap Inc. to begin with, and it is what
keeps me inspired as we chart our course for the future.
Sincerely,

Art Peck
CEO, Gap Inc.

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3

Highlights

Our futures are
woven together

WOMEN’S ADVANCEMENTEQUALITY + OPPORTUNITYVOLUNTEERS

1,000,000

60,000+EMPLOYEES

558,000

HOURS

By 2020, we will expand Gap Inc.
P.A.C.E. to more factories andcommunities to give one million
women worldwide the opportunity
to gain the skills and confidence
to change their lives.

We led our industry and raised theminimum wage to $10 for 60,000+
US employees in 2015. We were also
the first Fortune 500 company todisclose that we pay female and male
employees equally for equal work.

Our employees volunteered 558,000
hours in 2014 alone. This new record
was set with the support of more than
2,000 Community Leaders acrossthe world, who lead a wide range ofvolunteering projects for their teams.

WOMEN

YOUTH

2,000+WATER

There's a powerin our connection
to each other thatoffers unlimited
possibilities forcreating change.

17,000

CLIMATEFACTORY WORKING CONDITIONSDIVERSITY + INCLUSION

-50%

1,000
FACTORIESLEADERSHIP

We view access to a healthy environment
as a human right – and we've set
ambitious goals for 2020, including a
50% absolute reduction of greenhousegas emissions in owned and operated
facilities globally.

We consistently visit the factories thatmake our clothes – about 1,000 eachyear. Through innovative partnerships
and as a founding member of the
Alliance for Bangladesh Worker Safety,
we’re forging industry-wide change.

We’re a voice for marriage, racial,and gender equality. In 2015, womenmade up more than 70% of our seniorleadership, and we sponsored six
employee resource groups topromote diversity and inclusion.

TEENS + YOUNG ADULTS

More than 2,000 teens & young adults
have received job training and store
internships through our This Way
Ahead program. Our investments in
nonprofit organizations have reachedover 270,000 youth in the past 3 years.

EMISSIONSPEOPLE

Through our Women + Water
program, 17,000 people in India
now have access to clean water.
We partner with fabric mills and the
Natural Resources Defense Council
to conserve water and fight pollution.

70%

Learn more gapinc.com/sustainability

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4Our Sustainability Strategy
When our founders, Doris and Don Fisher, started Gap Inc. in 1969, a key
part of their vision of success was creating opportunities for the people
and communities touched by our business throughout the world.
In the decades since, we have been on a journey to live this vision. We have expanded ourefforts to ensure that the people who make our products work in safe, fair conditions. We
have started addressing our environmental footprint, taking steps to save energy, reduce
our greenhouse gas emissions and mitigate other effects of making our clothes. And wehave become more strategic in our work in the community, addressing social challenges
through programs that leverage our company’s core strengths.
Now we find ourselves at an important turning point.

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5

The Short Story

Strategy• We’re integrating sustainability more

We recognize that to create even greater change, the work of sustainability must becomea seamless part of running our company. This business integration is a critical step thatwill unlock possibilities – for our company as well as for others.

deeply into our business to create
greater impact.

• This strategy results in more

We feel an urgency about moving to this next phase in our evolution. Global challenges
such as climate change and inequality demand action – by all of us. We share an

widespread change for the people

environment that must be protected by everyone. Likewise, none of us can reach our

we touch and our business.

fullest potential if any one of us lacks the opportunity to do the same. Our futures are tied

• One example is collaboration between

together – and we must act together.

our sustainability and sourcing teams.

• These teams have created sharedThroughout our journey, the connections between us have meant that when we workgoals to improve factory working

to positively change people’s lives, they change us too. When the people who makeconditions.

our clothes work in safe, fair conditions, they can become more productive and help us
create better products. When women garment workers enhance their life skills throughour P.A.C.E. program, they bring newfound confidence and abilities to their jobs and lives.
When we keep chemicals out of local waterways and help prevent the negative effects ofclimate change, communities become stronger, in turn creating an environment in which
our business can thrive. When our employees feel empowered to be their best, they enable
us to be the same. One act builds on another.

“Sustainability is evolving to a newphase within many companies, witha larger number of employees
feeling real ownership andaccountability for the work.
It’s this deeper integration into thebusiness that will unlock greater
progress and impact.”– Dan Henkle, Senior Vice President, Global Sustainability
and President, Gap Foundation

Gap Inc. leaders visiting a supplier’s factory in Bangladesh

Creating sustainable impact on a bigger scale
Now, we aim to amplify these positive benefits by embedding the work of creating socialand environmental change more deeply into our business. This change goes far beyond
expanding programs, and represents a shift in mindset. Typically, our sustainability efforts
have started off with dedicated teams inside Gap Inc. As we move forward, this work
will start to belong to everyone, becoming part of how we run our business day-to-day.

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6Because of our reach as a global company, we believe that this shift will enable us tocreate sustainable impact on a much larger scale.
Our strategy is comprised of three major stages: creation, integration and impact. Creation
is when we first act or develop an innovative approach to creating social or environmental
change. Once we demonstrate that our efforts bring benefits both to the people andcommunities we serve, as well as to our business, we move on to integration. Integration
leads us away from a model in which sustainability is a separate function – and toward
one in which a much broader group of actors drives change. The result of this strategy isimpact – on a bigger scale and in a way that is sustainable for the long term.

When the people who make our clothes work in safe, fairconditions, they become more productive and help us
create better products.
A prime example of how business integration can help us move forward involves ourefforts to improve working conditions for the people who make our clothes. We have been
expanding these efforts for more than two decades and have played a leading role inmulti-stakeholder innovations such as the Better Work program, a collaborative approach
to monitoring factories. While we have made significant progress through the work of oursustainability team, we recognize that to create lasting, widespread change, our sourcing
team and brands also need to play active roles. These teams are finding new ways tocollaborate every day, including the setting of shared sustainability goals. They are also
taking an integrated approach to measuring the performance of our suppliers across all
dimensions that are important to us, from working conditions to environmental performance.

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7

DIVERSITY + INCLUSION

To support this work, we created a sustainability forum at Gap Inc. that brought
together some of our most senior leaders across the company to explore new ways

70%

LEADERSHIP
We’re a voice for marriage, racial,and gender equality. In 2015, womenmade up more than 70% of our seniorleadership, and we sponsored six
employee resource groups topromote diversity and inclusion.

of collaborating. We engaged a third party to verify and became the first Fortune 500
company to disclose that we pay female and male employees equally for equal workaround the world – whether dollar for dollar, pound for pound, yen for yen, or euro for
euro. We’re now exploring how to take this collaboration to the next level, including
joint ownership of long-term, ambitious goals that are approved and owned by leaders
throughout the business.

Building on our efforts through business integration
Another example in which business integration can drive change on a larger scale centerson our efforts to create greater equality. A year ago, for example, we became the first
Fortune 500 company to engage a third party to verify and publicly confirm that we pay
women and men equally for equal work around the world – whether dollar for dollar,
pound for pound, yen for yen, or euro for euro. In the U.S., for example, a woman makes
78 cents for every dollar a man earns. National Equal Pay Day represents how far into thecurrent year many women must work in order to close the gap from their previous year’s
earnings. In 2015, the date fell on April 14.

We think of our strategy as comprising three major stages:
creation, integration and impact.
Committing to equal pay for equal work has its roots in our culture. Our co-founder Doris
Fisher established early on that women would play a key role at Gap Inc. With women
making up over 70 percent of our senior leadership team, our commitment to theiradvancement is thoroughly integrated into our business. As a result, we can work tocreate impact on a larger scale. Beyond shaping our own culture, we seek to influence theculture at large – by making a statement about equal pay for women, we hope to inspireother companies to follow suit.
A final example of how business integration can spur our progress involves our efforts
to unleash the potential of youth through the transformative power of work. Through oursignature program This Way Ahead, we provide job readiness training and paid internships
for underserved youth in major cities such as New York and San Francisco. To date, 75
percent of This Way Ahead interns have been hired as permanent store associates, andtheir average tenure is almost twice as long as that of their peers.

Gap Inc. | Global Sustainability Report | Strategy

gapinc.com/sustainability8In other words, as youth have learned valuable skills and gotten jobs, we have benefitedby gaining access to a strong pipeline of talent. Now, given the benefits to our businessand young people in our communities, our brands are eager to play a greater role in This
Way Ahead, taking it beyond the realm of Gap Foundation, which launched the programin 2007. We are also setting goals to hire many more store associates from the program,
thereby creating change on a larger scale.

Identifying the most material issues for our business and stakeholders
Business integration goes hand-in-hand with focusing in on the key issues we need toprioritize in order to create the greatest impact. To identify these priorities, we recently
conducted an in-depth materiality assessment, weighing which issues matter most to ourbusiness and the people and communities we touch. We broke these issues into threemain categories: governance and operating context; human rights and social impacts;
and resource use, scarcity and impacts.

Throughout our journey,
the connections between
us have meant that when
we work to positively
change people’s lives,
they change us too.
Some of our findings reaffirmed our current direction. For example, we have longconsidered human capital and development – the ability of people to reach theirpotential and work at their best – to be critical to our success. Our conclusions also
underscored that water stewardship is essential for our business, as well as for people
and communities, and we are deepening our work in this area. Other issues thatemerged in our materiality assessment will demand more of our attention in the future. A
prime example is radical transparency, which is changing the business environment, as
consumers and stakeholders seek greater openness about products and services. We areasking how this new reality can become a tool for continuous improvement, so that radicaltransparency can be an advantage for our business.

Gap Inc. | Global Sustainability Report | Strategy

gapinc.com/sustainability9In some of the areas we are focused on, we are still at the early, creation stage of ourstrategy, while in others we have gone much further. And we are determined to continue
on the journey. In September 2015, for example, we announced a commitment toeducate one million women worldwide through our P.A.C.E. program, a scale that wasbarely imaginable when we first launched P.A.C.E. in 2007. Over time, we see enormous
potential to bring our strategy to life in other areas, from fighting climate change to further
supporting equality. And we believe that our efforts will help us become not just a moresustainable company, but a better company, one that unlocks new possibilities for all of us.

“In two years I havechanged so much.
Nobody believes it – andeven I can’t believe howmuch has changed.”– Sujatha, Gap Inc. P.A.C.E. program graduate, India

Meet Sujatha
When P.A.C.E. started, I was working as an operator. Even though I spoke well, I didn’t havemuch confidence or courage. I had only studied through 10th grade in the village where I
grew up, and I felt scared when the P.A.C.E. teacher would call on me. I didn’t have manyideas about my future. But as I attended the program, I learned to talk with different people.
I opened a savings account. I started to have new ideas and began to see how I could
accomplish them. My attendance in P.A.C.E. was 100 percent – and when the program
ended, I was promoted to be a supervisor. Now, every day in team meetings, my teammembers ask me to keep talking – they have a lot of curiosity and want to listen to me
more. Everyone tells me that I should motivate others to achieve what I have achieved. In my
opinion, P.A.C.E. should spread to all women. We can achieve whatever we want if we arededicated to it. And I’m an example of that. In two years I have changed so much. Nobody
believes it – and even I can’t believe how much has changed.

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10

Goals and Progress
Holding ourselves accountable is fundamental to our approach to sustainability – below are key goals, ourprogress to date and where we are heading in the future.

New & Current Goals
Factory Working Conditions
100% of Gap Inc. strategic suppliers* of branded apparel will have a sustainability rating of green or yellow
100% of strategic suppliers of branded apparel self-report their sustainability performance in Gap Inc.’s global
sustainability data system

Completion Target*
2020
2018

Partner with Verité and strategic suppliers to measure workers’ sense of value and engagement at work, and launch projects
aimed at improving 20,000 workers’ engagement. Publicly report on findings and impact, and share best practices with all

2018

Gap Inc. suppliers

Employees
Ensure female representation at all leadership levels is meaningfully above external norms

Ongoing

Pilot and commit to expand programs that provide advance notice and stable, flexible scheduling to store employees

2017

Provide free job skills training to 300,000 people that improves their opportunities to obtain entry-level positions at Old Navy stores

2016

Environment
50% absolute reduction of greenhouse gas emissions in our owned and operated facilities globally

2020

80% waste diversion from landfill for our U.S. facilities

2020

Work towards zero discharge of hazardous chemicals in our supply chain through membership in ZDHC 2020 Roadmap

2020

Community
Women
Improve the lives of one million women in Gap Inc.’s supply chain and other manufacturing and community settings throughthe Gap Inc. P.A.C.E. program
Expand P.A.C.E. to a suite of learning programs that provides multiple entry points for addressing the needs of adolescent
girls and women leaders

2020

2020

Volunteering
All teams have a Community Leader (CL), and all CLs organize and lead at least 3 volunteer projects per year

2018

All teams form a long-term relationship with one nonprofit partner to maximize volunteering impact

2018

Youth
60% of This Way Ahead participants report increased on-the-job skills and confidence as a result of their internships

2018

65% of This Way Ahead interns are hired on as Gap Inc. sales associates upon the completion of their internships

2020*end of year

* Strategic suppliers accounted for 84 percent of our sourcing costs for branded apparel in 2015.

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11

Progress Against Existing Goals
Factory Working Conditions

Completion
TargetProgress

Details(On-Track / Partial/ Achieved)

Better Work and Gap Inc. assessed an average
70% or more of factories in ILO Better Work
markets participate in Better Work (BW) programof 44% and 56% of factories in BW markets in2014

Partial2014. BW participation was lower than targeted
due to its slower-than-expected expansion in
Vietnam and limited staff in Indonesia.

All factories Gap Inc. sources from in
Through the Alliance for Bangladesh Worker

Bangladesh complete comprehensive fire andbuilding safety inspections by July 2014, and2014

Achieved

Safety, all factories completed inspections andbegan implementing remediation plans.

have begun implementing remediation plans toensure safety standards are met
Build a team of dedicated supplier capability
building experts who are fully trained and deployed

Developed teams of social and environmental
2015

Achievedcapability building experts located in key
sourcing countries.

Environment
Mapped water risks in key countries for fabricComplete supply chain water mapping andcreate a supply chain water strategy

2014

Achieved

mills and denim laundries. Developed millsustainability program and improved Water
Quality Program.

Reduce absolute U.S. GHG emissions 20%
from 2008 level

2015

Achieved

emissions by 2014.
Helped 20 strategic mills in China, India,

Partner with 20 key fabric mill suppliers toestablish social and environmental responsibility

Achieved 33% reduction in U.S. GHG

2015

Achieved

standards and improve performance

Pakistan and Taiwan conduct environmental
self-assessments using the Sustainable Apparel
Coalition’s (SAC) Higg Index.

Employees
Analyzed metrics to evaluate key HR initiatives(e.g., confirmed equal pay for men and womenContinue to build a globally effective, more agile

globally and showed minimum wage increaseorganization by increasing the developmentof global leadership skills, and the enhanced

2014

Achieved

utilization of metrics to manage talent andimproved retention, productivity and application
volume). Continued to implement a talent
dashboard for key workforce metrics (e.g.,

evaluate HR programs and processes

turnover, hiring), which is routinely used bysenior leadership.
Continued to implement global brands
structure, including laying the foundation

Become a more globally effective organization

for Old Navy’s expansion into Mexico. Grew

by moving to a global brands structure
and providing leaders the opportunity to2014

Achievedinternal hires for international leadership roles

develop and grow through an array ofby 33%, which provided global experience andinternational assignments

development opportunities for leaders in key
international markets.

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12Eliminated annual performance ratings andlaunched GPS - Grow. Perform. Succeed., a

Maintain and assess high levels of employee
engagement through a more effective andfrequent monitoring process to collect2014

Achieved

new monthly system for manager-employee
performance discussions. Maintained highemployee engagement scores, exceeding

employee feedback

external best-in-class benchmarks.

Community
Women
Increase vendor participation in the Gap Inc.
P.A.C.E. program by expanding program to 40

29 suppliers participated in P.A.C.E. by the end
2015

Achieved

key vendors
An additional 10,000 female garment workers
complete P.A.C.E. programof 2014. 11 more committed in 2015 to date
and are in various stages of implementation.

2015

Achieved2013 / 2015

Achieved

10,691 additional women completed P.A.C.E.
during 2013 – 2014.

Expand P.A.C.E. program into community
settings by partnering with select NGOs todevelop and implement modified P.A.C.E.
community program—Target 3 community

Piloted program in 24 villages in India andCambodia in 2013. Expanded to operating 10
programs in nine countries as of 2015 to date.

programs in 2013 and 10 community
programs by 2015
Volunteering
Increase the impact of employee volunteering by

677 Community Leaders identified long-term

encouraging each employee team to identify acommunity partners by Q4 2013. Efforts have

Community Leader, and then form a long-term
partnership with one community organization.

2013

Partialre-focused to identify the most qualified leaders,
who will build strategic partnerships with

1,200 Community Leaders identify long-term

organizations to maximize community impact

community partners

and enhance long-term employee benefits.

Set a target of creating $16 million in employeedriven value to the community in 2014. This
includes employees’ donations of time and2014

Achieved

Ongoing

Achieved

Provided $17,251,648 worth of employee timeand money in 2014, including company match.

money, and Gap Inc.’s financial match of both
Youth
Provide 95% of our key youth-serving
community partners with support beyond

Delivered support beyond cash grants to morecash grants

and 2014.

Through Gap Foundation’s community partners,
serve at least 70,000 underserved youth andyoung adults per year

Gap Inc. | Global Sustainability Report | Strategy

than 95% of youth-serving partners in both 2013

Ongoing

Achieved

Supported 90,000 underserved youth and young
adults in both 2013 and 2014.

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13

Assessing Materiality
We are prioritizing the opportunities and challenges in sustainability thatmatter most to our stakeholders and business.
In 2014, we embarked on an in-depth assessment, working with third-party experts to
identify and evaluate an extensive list of environmental, social, governance, economic andother issues that could impact our company and the people our business touches aroundthe world.
We collected input and feedback from a variety of external stakeholders and business
partners across Gap Inc. In addition, we drew on the insights that we have gathered fromyears of visiting factories and interviewing the people who make our clothes, as well asfrom running our own employee programs. Our participation in various industry and multistakeholder initiatives added further perspective on key issues.

We evaluated issues based on the magnitude, likelihood
and time horizon of their potential impacts on stakeholders
and our business.
We evaluated issues based on the magnitude, likelihood and time horizon of their potential
impacts on stakeholders and our business.
Through this process, we identified 15 sustainability-related aspects that guide ourstrategy and grouped them into three categories: Governance & Operating Context;
Human Rights & Social Impact; and Resource Use, Scarcity & Impacts. The chart below
shows these aspects and where they occur within and outside of Gap Inc.

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Gap Inc. Global Sustainability Materiality Assesment
Aspect Boundary

Materiality Category & Aspect

Within Gap Inc.

Outside Gap Inc.

Governance & Operating Context
Customers, Supply Chain,

Corporate Governance

Global Operations

Country/Regional Legal & Economic Conditions

Global Operations

Radical Transparency

Global Operations

Technology & Product Innovation

Global Operations

Supply Chain

Resiliency

Global Operations

Supply Chain

Worker Rights & Well-­being

Global Operations

Supply Chain

Income, Wages & Inequality

Global Operations

Human Capital & Development

Global Operations

Diversity & Inclusion

Global Operations

Reputation & Consumer Engagement

Global Operations

Communities
Supply Chain
Customers, Supply Chain,Communities

Human Rights & Social Impacts

Customers, Supply Chain,Communities
Supply Chain
Supply Chain,Communities
Customers, Supply Chain,Communities

Resource Use, Scarcity & Impacts
Water Stewardship

Global Operations

Chemicals & Toxics Management

Global Operations

Energy & Climate Stewardship

Global Operations

Waste & End of Life

Global Operations

Sustainable Materials Sourcing

Global Operations

Gap Inc. | Global Sustainability Report | Strategy

Customers, Supply Chain,Communities
Customers, Supply Chain,Communities
Customers, Supply Chain,Communities
Customers,
Supply Chain
Supply Chain,Communities

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15

The Short Story

Stakeholders• Issues such as climate change andworker safety demand that we joinwith others to forge solutions.

Engaging Stakeholders
We know that we can’t tackle many of the challenges we face on ourown, and engaging stakeholders is a critical component of our social andenvironmental strategy throughout the world.

• A range of perspectives enables us
to design initiatives that help bringabout long-term, sustainable change.

• Our latest collaborations take aninnovative approach to challenges
facing our industry.

We work with highly diverse people and organizations to foster a clearer understanding ofcomplex issues, as well as local conditions in the countries where we do business and our
products are made. The insights we gain through this ongoing dialogue not only help us
improve our programs, but enable us to continually refine our strategy as conditions andchallenges evolve in our industry.

• One example is our partnershipwith Verité to better understand theexperience of people who makeour clothes.

Some of our key stakeholders include: the people who make our clothes, customers,
suppliers and factories, employees, unions, governments, multilateral institutions, nongovernmental organizations, industry associations, investors, communities and others. We
also belong to a number of organizations that enable us to more effectively collaborate
with and learn from stakeholders. Multi-stakeholder initiatives that bring togetherorganizations and people from different sectors play a key role in finding new approaches
and creating collective action. A list of organizations and initiatives that we belong to or
partner with can be found at gapinc.com/sustainability.

“To create the change we’re after, we can’t do this work alone. We partnerwith organizations large and small to make this work happen. The United
Nations is one of them. For years, we’ve supported the UN Global Compact
and its guiding principles.”– Art Peck, CEO, Gap Inc.
We develop issue maps and models to identify and prioritize the issues that matter mostto stakeholders and our business. These tools take into account such factors as the levelof public awareness about an issue, expert opinion and consensus, the magnitude andtiming of impact, expectations for our business and our ability to influence issues.
We are evolving our strategy for engaging stakeholders to take a more proactive, systemic
approach that addresses root causes and better accounts for all of the people andorganizations that may be affected by an issue. We are working to balance our efforts to
respond to specific issues with our overall goal to help build a more sustainable garment industry.

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16

A key aspect of our stakeholder strategy includes cultivating medium and long-term
thinking in our business and integrating sustainability more deeply into our businessstrategy. We are also creating solutions that matter most to workers and contributemost directly to improving their lives. Examples include our partnership in Better Work’s
Workplace Cooperation Program and support for the Project on Sustainable Labor
Practices in Global Supply Chains, as described on page 56.

Ensuring Strong GovernanceStrong governance is essential to the work of sustainability. These efforts
start with a commitment from our leadership, whose input and oversightplay a critical role in driving our progress.
For us, good governance begins with a strong Board of Directors that has an independent
perspective on our business and company management, including our approach tocreating social and environmental change.

We recognize the valuethat diversity and women’s
leadership brings to our
Board and company.

Gap Inc.’s Board is responsible for oversight of the business, affairs and integrity of thecompany, determination of the company’s mission, long-term strategy and objectives,and oversight of the company’s risks, while evaluating and directing implementation ofcompany controls and procedures.
The Board consists of eleven members, including nine independent directors and an
Independent Chairman, with women holding four of eleven seats on our board, and meetsat least five times per year. It has three committees: Audit and Finance, Compensationand Management Development, and Governance and Sustainability.

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Sustainability
Our Board’s Governance and Sustainability Committee oversees Gap Inc.’s sustainability
programs and practices.
Dan Henkle, Senior Vice President, Global Sustainability and President, Gap Foundation,
updates and engages the Committee on our sustainability programs and progress quarterly.
They regularly discuss our efforts to address key social and environmental issues for ourbusiness, including our programs to help improve human rights, working conditions andenvironmental sustainability at the factories that make our clothes.
Dan reports to Bobbi Silten, Executive Vice President, Global Talent & Sustainability, whoreports directly to Gap Inc. CEO Art Peck.
Our Environmental Council plays an important role in embedding sustainability into ourbusiness by considering new initiatives and reviewing progress on existing goals andprograms. The council is sponsored by an Executive Vice President and includes otherfunctional leaders and subject matter experts across the company.
We form cross-functional steering committees of senior leaders to oversee key initiatives.
Recent examples include our initiative to expand opportunities for women and decision tosource products in Myanmar.

Acting Ethically
Our ethics are ingrained in the culture of Gap Inc. and inform how we run
our business each day. We continually review and update our practices
as our business evolves.
All of our people are required to complete training on and uphold our ethical standards
and compliance procedures. Our Code of Business Conduct (COBC) serves as our ethicalcompass for the commitment we make to our stakeholders, customers and one another.
Our employees are encouraged to use our open door process for discussing any
concerns with their supervisor, next level manager or human resources representative.
Employees may also contact our Global Integrity team, who oversees our COBC program.
A confidential COBC hotline, email box and web portal are also available 24 hours a day,seven days a week to employees and anyone who conducts business with Gap Inc.
or is affected by our business. We have investigative teams that process and address

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18complaints received through any channel, including our COBC hotlines. All information islogged and cases are addressed and closed.
We need to be diligent about corruption risks, particularly in developing countries withlimited rule of law. We have a company-wide program for monitoring, enforcing andaddressing any issues related to our Anti-Corruption Policy, which combines elementsfrom our COBC with anti-bribery requirements under the U.S. Foreign Corrupt Practices
Act (FCPA) and other similar laws around the world. The policy and related training
programs help employees recognize and avoid corrupt business practices in all aspects of
Gap Inc.’s business.

Our Code of BusinessConduct serves as our
ethical compass for thecommitment we maketo our stakeholders,customers and one another.
Managing Risks
Our Internal Audit team conducts in-depth risk assessment interviews
annually with more than 50 of the company’s top executives and board
members. A subset of about 20 people is interviewed quarterly to trackchanges in the company’s risk profile.
At the asset level, our Business Continuity Planning (BCP) team analyzes, prioritizes andhelps to mitigate risks resulting from extreme weather, natural hazards and other external
events. BCP relies on predictive and actual models from the National Oceanic andAtmospheric Administration (NOAA) and other agencies and GoogleEarth tracking tools to
track and evaluate potential impacts to Gap Inc. facilities.
Our sustainability and sourcing functions assess and manage risks in our supply chain anddevelop country-specific approaches to evaluating and addressing risks. Learn more in
the section on Improving Factory Working Conditions on page 23.

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From Concept to Reuse:
Mapping Our Supply Chain

WATER
Fabric mills and denim
laundries play an essential
role in producing yourclothes, but they also uselarge quantities of waterand chemicals to dye andfinish fabrics.

A product has a whole life – both before it hits our stores and after it
leaves our hands and is worn by our customers. Each stage, from thefirst sketches to where it ends up after our customers clean their closets,offers opportunities and risks for our business and all those who aretouched by our business.
1 Product Design & Sourcing
A designer’s creative vision for yourto address these issues that connects

next pair of jeans can ultimately end up

with and complements our strategy for

affecting people and the environment.

ensuring that people have access to clean,

And as they bring this vision to life bysafe water.

placing orders with independent suppliers,
our production and sourcing teams have

3 Fabric Mills & Denim Laundries

significant influence over who makes

Both fabric mills and denim laundries

your clothes – which affects our ability

play an essential role in producing yourto improve working conditions insideclothes, but they also use large quantities

factories as well as our environmentalof water, and the chemicals used to dye

footprint. Through collaboration between

and finish fabrics pose a risk to local

our sourcing and sustainability teams, wewaterways. We have programs in place

can make more sustainable choices, evenboth to improve water practices at fabricat this early point in the process of making

mills and ensure that washing your denim

our clothes.

does not contaminate local waterways
or harm local communities. In addition,

2 Raw Materials

we are working to eliminate the use of

Check your tags – most of our products

hazardous chemicals. And through our

include some cotton, and its production

Women + Water strategy, we are working

affects both the environment and people.

to improve women’s access to safe, clean

Farming and processing cotton typicallywater sources.

involves the use of large quantities ofwater as well as chemicals, and often

4 Garment Factories

takes place in regions facing water andWorkers at garment factories bring theclimate risks. In addition, cotton provides

designs for our clothing to life, and every

a livelihood for many people throughout

shirt or pair of jeans that we sell has

the world, including migrant laborers,

been touched by many people’s hands.

and there is a need to protect their health

Garment factories are a critical sourceand ensure that they work in safe, fairof jobs for many people in developing

conditions. We are developing a strategy

countries, but the apparel industry still

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We have been working for more than two decades
to improve working conditions in the factories thatmake our clothes.
faces challenges in protecting worker

air, truck and rail from factories to oursafety and human rights. We have been

distribution centers and then on to storesworking for more than two decades toor directly to customers. We focus on

improve working conditions in the factories

finding the optimal mix of shipping options

that make our clothes. Most recently, we

based on speed, cost and sustainability

have done a thorough assessment ofand have taken steps to conserve energy

our program and have introduced newat our distribution centers, which are theapproaches, such as a partnership withlargest facilities we own and operate.

Verité that focuses on listening to worker
voices. We are also helping factories

6 Storesassess and reduce their environmental

Our stores express who we are – from ourfootprint, including conserving the energy

style to our commitment to operating in

used to light facilities and operate equipment.

a way that cares for both people and theenvironment. We have raised the minimum

5 Logistics & Distribution

wage for over 60,000 hourly employees

Getting our clothes to one of ourand are improving scheduling practices

stores – or your front door – can involveto help attract and retain top talent andcomplicated logistics and contributes

enable people to work at their best. We

to our environmental footprint. We ship

are also looking for new ways to mitigate

products through a combination of sea,

our stores’ environmental footprint.

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21

Through energy-saving LED lighting andMany of our customers also seek toother measures, we have improved our

reduce waste by donating their clothes

energy efficiency, and we are working

or finding ways to re-use them – and our

toward an ambitious goal to divert waste.

brands have run a variety of campaigns to
support these efforts. One example was

7 Consumer use

an initiative by Gap called “Recycle YourThe story of our clothes doesn’t end

Blues,” which encouraged customers toafter they are made and sold. How ourdrop off their old jeans at our stores forcustomers wear, care for and discard

use as housing insulation in underserved

their clothes accounts for a share of ourcommunities. We are continuing to

products’ total environmental footprint.

explore ways to encourage these kinds of

Increasingly, our customers are

behaviors, which will help us deepen our

becoming aware of such energy-saving

relationship with customers and joinmeasures as washing clothes in cold waterwith them in our efforts to create a– which can reduce energy consumption

healthier environment.

by up to 90 percent – and using front-load
washing machines, which can cut water
use by up to half.

Our stores express who
we are – from our style
to our commitment tooperating in a way thatcares for both people andthe environment.

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Improving Factory Working Conditions
Every piece of clothing that we sell is created by someone’s hands – manyof our products are touched by multiple people, most likely women, who
sew a zipper on a pair of jeans or reinforce the seam of a shirt.
In fact, more than one million people work in the factories where our products are made.
Every day we pore over creative ideas for our clothes, spending time on every detail. But
without the people who make them, this vision would never come to life.
We continue to strive to ensure that – as they fill such an important role for our company– the people who make our clothes work in safe, fair conditions and that they are treatedwith dignity and respect. For many of them, working in the garment industry provides
a critical opportunity to create a better life for themselves and their families. Yet local
infrastructure and rule of law can be lacking, and the industry still faces challenges inprotecting worker safety and human rights. As one of the world’s largest apparel retailers,
we recognize that we have a responsibility to address these issues, and we believe that

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23our business can only thrive when the people who make our clothes have the chance todo the same. We also believe that like us, our customers care about the conditions underwhich their clothes are made and the lives of the people who make them.
This sense of connection unlocks new possibilities for change. When factory employees
are treated fairly and work in safe conditions, they can perform at their best, helping us
create better products and better serve our customers. When customers, in turn, share
their expectations and feedback with us, they help to make us a stronger company, onethat can play a part in leading the industry toward further improvements.

We continue to strive
to ensure that thepeople who make ourclothes work in safe, fairconditions and are treatedwith dignity and respect.
We have significantly expanded our efforts since we wrote our first vendor guidelines
in 1992 – and in the past few years, we have done a thorough reassessment of our
The Short Story

Working Conditions

approach, laying the groundwork for further progress. We have introduced a range ofimprovements as well as innovative approaches to better understand the experience ofthe people who make our clothes and make sure that their voices are heard.

• We work with governments, NGOs,
trade unions and others to forge
innovative solutions to systemic issues.

• A new partnership with Verité focuseson listening to feedback from thepeople who make our clothes about
their work experience.

• Collaboration between our sustainability
and sourcing teams is driving greater
progress.

• By the end of 2020, we have set a

Protecting human rights and addressing systemic challenges
All of our efforts are guided by our commitment to honoring and protecting the humanrights of the people who make our clothes, as spelled out in our Human Rights Policy.
This policy establishes key principles that guide how we run our business, as well as thecore issues that we work to address, such as the prohibition of any and all forms of childor forced labor. In addition, we continue to maintain our own team of specialists who live
and work in a wide range of countries to ensure that our Code of Vendor Conduct is morethan a document – it helps to create real progress through our actions.

goal for all strategic suppliers to be

Our team talks extensively with workers at factories where our clothes are made, and we

rated green or yellow.

follow up on the issues we find. We focus much of our time on complex issues such as

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WORKING CONDITIONS

tackling the use of unauthorized subcontracting, fire and safety issues inside factories,
freedom of association and excessive overtime.

300

SUPPLIERS
In 2014, we purchased over
$6 billion worth of branded
clothing from more than 300
independent suppliers and
1,000 factories.

Because many of these issues touch on systemic challenges, we know that we can’t
tackle them on our own and have partnered with governments, NGOs, trade unions
and other brands and retailers to come up with innovative solutions. A prime example
is the Better Work program, a multi-stakeholder collaboration led by the International
Labor Organization (ILO) to create a joint approach to monitoring factories. We work inclose partnership with the ILO, sitting on its advisory board and piloting the Better Workprogram in new countries, including Bangladesh.

We have introduced a range of improvements as wellas innovative approaches to better understand theexperience of the people who make our clothes.
Designing new approaches
Despite making progress, we know that we must continually raise the bar on our efforts,
as the pace of production gets faster, competition intensifies and demand for lower-cost,
fast fashion remains strong. In other words, the challenges we face continue to become
more complex.
Over the past few years, we have invested in doing a deep review of our work anddesigning new approaches. For example, we worked with an outside consultancy to
examine our supplier sustainability program and make numerous improvements. We
have developed a country-specific approach to assessing risk and creating strategies
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25government, ILO, development agencies and other companies to build a responsible
apparel industry.
One of our most innovative programs centers on a partnership with Verité – a leading
non-governmental organization (NGO) focused on ensuring that people work undersafe, fair, and legal conditions. Together we are expanding on traditional approaches toimproving working conditions by measuring and improving how much workers feel valued
and engaged at work. Our collaboration centers on eliciting and listening to workers’ own
voices: How are they treated? Do they feel negatively or positively about their jobs? Whatwould they like to see improved?

Most of our suppliers are large, multinational businesses.
Many actively monitor their labor practices, provide healthand safety training to workers and have programs to
improve their environmental sustainability.
By understanding workers’ points of view and addressing issues from their perspective,
we see new opportunity to improve their experience of work. In addition, we will be
sharing some of our own human resources best practices with our suppliers, so thatthey can learn from what we have found to be successful at Gap Inc. We aim to help
the factories where our products are made become preferred employers in thecommunities in which they operate, creating business benefits such as higher retention
and improved productivity.
We are also supporting another program that focuses on empowering workers throughour adoption of ILO Better Work’s Workplace Cooperation Program, which aims toprovide workers and management with the skills needed to jointly resolve workplace
FACTORY WORKING CONDITIONS

1,000

FACTORIES

We consistently visit the factories thatmake our clothes – about 1,000 eachyear. Through innovative partnerships
and as a founding member of the
Alliance for Bangladesh Worker Safety,
we’re forging industry-wide change.

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issues and engage in respectful collaboration. In 2015, we provided ILO Better Work
with a grant to scale this important program, and will soon use this curriculum as thebasis for our updated capability building program. We believe that focusing on improving
dialogue and relations will help workers and management prevent future labor disputes,
resolve problems more effectively, give greater voice to workers and improve productivity
and competitiveness.
Beyond such programs, we have also worked to make improvements within Gap Inc.
In order to create lasting, wide-scale change to working conditions inside factories, werecognize that our sustainability team can’t act alone, but must be joined by our sourcing
team and key players from each of our brands. These teams are finding new ways togapinc.com/sustainability

26

collaborate every day, including the setting of shared sustainability goals. They are also
taking an integrated approach to measuring the performance of our suppliers. And they
are working with fewer and more preferred suppliers with whom we can cultivate longterm, close relationships that enable us to create greater change.
Business integration has also helped spur progress through our P.A.C.E. program, which has
been embraced by our suppliers and brings benefits to multiple stakeholders. Since 2007,
the Gap Inc. P.A.C.E. program has provided more than 30,000 women with the opportunity
to gain skills and confidence to advance both at work and in life. In September 2015 wecommitted to greatly expand the program, setting a goal to educate one million women
throughout our supply chain and in communities around the world by the end of 2020.

One of our most innovative
programs centers on
eliciting and listening toworkers’ voices – how are
they treated? Do they feel
negatively or positively
about their jobs?
More than 20 years since we began our journey to improve working conditions, we arestill learning – and facing new challenges. For example, we documented more red-rated
factories in the 2013-2014 time period than in 2011-2012 (red is our lowest rating andsignals that immediate action is required at a factory to address one or more serious
issues). This finding spurred us to investigate further and take steps to reverse this trend.
For the first time in 2014, our sustainability and sourcing teams came together to set –and achieve – a shared goal to address issues at red-rated factories. We succeeded inresolving 96 percent of critical issues and 81 percent of other open issues at all lowperforming factories in this category.
In addition, we are continuing to invest in new programs such as our work with Verité, andwe have evolved our rating methodology to more accurately assess factory performanceand focus our time on the most critical issues. We have set a goal that all strategic
suppliers will have a sustainability rating of green or yellow by the end of 2020. These
suppliers accounted for 84 percent of our sourcing costs for branded apparel in 2015.

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While the world has changed in many ways since we started this important work, what
hasn’t changed is the value of the very human effort that goes into making our clothes.
The people who bring our designs to life play a critical role in enabling us to fulfill ourpotential as a company, and we aim to create that same opportunity for them. The
challenges we face are complex, and we know that we have more work to do, but wealso see even greater possibilities to unlock positive change in the future.

“When we improve working conditions and create opportunities for thepeople who make our clothes, we enhance our ability to deliver great
products to our customers. Our sourcing and sustainability teams work
together seamlessly to bring benefits to everyone, from our partners to
the people whose lives we touch in communities throughout the world.”– Sonia Syngal, Executive Vice President, Global Supply Chain and Product Operations

Respecting Human Rights in Our Supply Chain
We could not succeed as a company without the people who make ourclothes, and we are committed to ensuring that they work in safe, fairconditions and are treated with dignity and respect.
The Short Story

Human Rights• Garment industry jobs help many
people build a better life, but

At the core of these efforts is our work to protect workers’ human rights. We havedeveloped our approach based on years of assessing factories, dialogue with stakeholder
organizations and interactions with factory management and workers at the factories that
supply our branded clothing.

some regions suffer from a lackof infrastructure or rule of law.

Gap Inc.’s Human Rights Policy documents and guides our commitment to respect• We focus on talking with people whointernationally recognized human rights and avoid involvement in human rights abuses.

make our clothes to learn of issues

We support the principles contained within the Universal Declaration of Human Rightsthat need to be addressed.

• We strictly prohibit child or forced(UDHR); the U.N. Global Compact; the OECD Guidelines for Multinational Enterprises; andthe International Labor Organization’s (ILO) Core Conventions.

labor — and immediately act in rare
instances when they arise.

• We work to ensure that people areprotected from discrimination or
mistreatment, enjoy the right to

To date, we have largely focused on human rights issues at garment factories where wehave direct contractual relationships and greater influence to create improvements. We are
evolving our human rights strategy to address human rights issues in other parts of our

freedom of association and can raise

supply chain, including those areas where we have less direct influence but nonethelessissues at work.

see opportunities to create positive change.

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Below are key human rights issues that we address on an ongoing basis.

Child Labor and Young Workers
Gap Inc. does not tolerate the use of child labor under any circumstances. The use ofchild labor is explicitly prohibited by our Human Rights Policy and our Code of Vendor
Conduct (COVC). Our COVC establishes requirements that all factories must meet to dobusiness with Gap Inc. Both policies are available at gapinc.com/sustainability.
While cases of child labor are very rare in the factories that make our branded clothing, wetake immediate action to resolve any cases that we encounter. We also work to ensurethat factories respect local laws and international standards related to employing younger
workers who are not children.
Child labor is a serious, complicated issue that tends to be more prevalent in places withhigh rates of poverty and limited opportunities. Young people may look for or be forced towork for many reasons and often sacrifice their education and chance to build a better life.

Our field team interviews workers and management
about recruitment and hiring, labor practices and working
conditions for young workers.
During factory visits, our field team interviews workers and managers about recruitment
and hiring, labor practices and working conditions for young workers. They check for
lawful, unaltered documents to verify workers’ ages, since workers can go to great lengths
to obtain counterfeit documents. Our team also monitors whether factories are upholding
labor laws and standards for legal young workers.
In the rare event that we encounter child labor at an approved factory, we take immediate
action to resolve the issue, including:•

Removing workers from the factory•

Making sure workers have access to education, receive an ongoing wage and are
guaranteed a job if they choose to work at the factory when they are older•

Requiring the offending supplier to pay for all remediation costs

Uzbek Cotton
It has been well established that the government of Uzbekistan has long relied on forcedchild labor to harvest the country’s cotton. We have worked to educate and influence our
suppliers and factories on this issue, making it clear that we will not accept any clothing
manufactured with fabrics that were knowingly made from Uzbek cotton.

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Results
Most factories complied with Gap Inc.’s COVC requirements prohibiting child labor and regulating practices for young workers
during 2013 – 2014. We encountered a limited number of cases where factories needed to take corrective actions to addresscompliance issues.

Child Labor and Young Workers: % of Factories Not Complying with Gap Inc. Requirements% of Factories
Code of Vendor Conduct (COVC) Issue
2011

2012

2013

2014

Did not comply with all laws or international standards for child or under-age labor
Top 3 Sourcing Regions

5.6%

6.1%

5.0%

3.1%

All Sourcing Regions

4.5%

4.9%

4.3%

2.8%

Employed workers below legal minimum age or 15 years old (whichever is higher)
Top 3 Sourcing Regions

0.7%

0.5%

0.6%

0.3%

All Sourcing Regions

0.6%

0.4%

0.5%

0.4%

Top 3 Sourcing Regions

984

955

952

968

All Sourcing Regions

1255

1178

1152

1083

Number of Factories AssessedChild Labor and Young Workers: Examples of Issues and Corrective Actions at Garment Factories (2013-2014)
Code of Vendor Conduct (COVC)

Corrective Actions

Issue Examples:by Factories Included:

Did not conduct health checks for young workers

Perform annual medical checks

Did not register young workers with the local labor bureau

Properly register young workers with local government

Young workers exceeded overtime limits or worked the night shift outside

Monitor overtime hours for young workers on a weekly basis; Limit hours toof allowed hours

approved work times

Young workers engaged in hazardous or performed unpermitted work

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Post notices of social protections for young workers;
Only employ workers 18 years of age or older

gapinc.com/sustainability30Forced Labor
The International Labor Organization (ILO) estimates that more than 20 million people
around the world are forced to work against their free will. This issue has received
heightened attention over the past several years due to the innovative and diligent workof non-governmental organizations, governments, multilateral organizations, media
and companies.
At Gap Inc., we explicitly prohibit the use of forced labor in the making of our products
through our Code of Vendor Conduct and our Vendor Compliance Agreements, and we
actively work against this violation of fundamental human rights.

We explicitly prohibit the use of forced labor in the makingof our products through our Code of Vendor Conduct andour Vendor Compliance Agreements, and we actively work
against this violation of fundamental human rights.
At garment factories, our field team interviews both workers and management andreviews records to help ensure that workers:•

Have voluntarily agreed to all employment terms•

Are free to end their employment if and when they choose•

Can freely enter and exit their work spaces and living quarters

We welcomed the California Transparency in Supply Chains Act, enacted in 2012, which
requires companies of a certain size to publicly communicate their efforts to identify
and eliminate forced labor in their supply chains. We have a policy to comply with thislegislation, which is an important lever in the global fight against human trafficking.
We also collaborate with stakeholder networks in key sourcing countries to monitor andaddress cases of forced labor. Learn more about our work to address the Sumangali
forced labor scheme in southern India at gapinc.com/sustainability.

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Results
Most factories complied with Gap Inc.’s COVC requirements prohibiting forced labor during 2013 – 2014. We encountered a limited
number of cases where factories needed to take corrective actions to address compliance issues.

Forced Labor: % of Factories Not Complying with Gap Inc. Requirements% of Factories
Code of Vendor Conduct (COVC) Issue
2011

2012

2013

2014

Top 3 Sourcing Regions

0.2%

0.3%

0.0%

0.4%

All Sourcing Regions

0.2%

0.3%

0.0%

0.6%

Top 3 Sourcing Regions

984

955

952

968

All Sourcing Regions

1255

1178

1152

1083

Used involuntary labor

Number of Factories Assessed

Forced Labor: Examples of Issues and Corrective Actions at Garment Factories (2013-2014)
Code of Vendor Conduct (COVC)

Corrective Actions

Issue Examples:by Factories Included:

Workers required to work overtime and on weekends if they could not meettheir production targets
Holding original certificates of employees that could restrain their freedom
to find other work

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Stop requiring overtime work on weekends

Released all original certificates to employees

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Discrimination
We are committed to ensuring that the people who make our clothes are not subject toany form of discrimination. And we are sensitive to both overt and subtle types of bias:
roughly 80 percent of the people who make our clothes are women, while managers andsupervisors are often men. Along with the employment of migrant workers and the diverse
ethnic backgrounds of the people who work in garment factories, these circumstances
can raise the risk of gender and ethnic discrimination.

We are committed to ensuring that the people who makeour clothes are not subject to any form of discrimination.
We require factory managers to treat the people who make our clothes equally and fairly,
without consideration of workers’ gender, ethnicity or sexual orientation in hiring, pay
and promotion decisions. Our field team interviews workers and checks for any signs of
discrimination in hiring criteria, as well as contract terms, labor practices, payroll records,
tests or medical exams workers may be asked to take. Our guide for assessing factories
also identifies common risks and best practices for pregnant or nursing women,
including: re-arranging working hours; adjusting overtime hours; and offering greater
flexibility for break times.

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Results
Most factories complied with Gap Inc.’s COVC requirements prohibiting discrimination during 2013 – 2014. We encountered alimited number of cases where factories needed to take corrective actions to address compliance issues.

Discrimination: % of Factories Not Complying with Gap Inc. Requirements% of Factories
Code of Vendor Conduct (COVC) Issue
2011

2012

2013

2014

Top 3 Sourcing Regions

0.1%

0.0%

0.2%

0.2%

All Sourcing Regions

0.2%

0.3%

0.5%

0.5%

Top 3 Sourcing Regions

1.6%

2.0%

2.4%

1.9%

All Sourcing Regions

2.6%

2.2%

2.0%

1.9%

Top 3 Sourcing Regions

984

955

952

968

All Sourcing Regions

1255

1178

1152

1083

Had discriminatory distribution of wages and benefits

Had discriminatory hiring policy

Number of Factories Assessed

Discrimination: Examples of Issues and Corrective Actions at Garment Factories (2013-2014)
Code of Vendor Conduct (COVC)

Corrective Actions

Issue Examples:by Factories Included:

Different contract terms were given to female and male workers; Pregnant

Committed to provide the same contract terms to all female and maleworkers' contracts were not renewed

workers; Provided workers with copies of their employment contracts

Gender and age factored into hiring decisions (e.g., female applicants
asked if they were pregnant)
Pay was deducted for time spent breast feeding

Gap Inc. | Global Sustainability Report | People

Conducted training on policies and practices for hiring, maternity leave andbreast feeding and ensured policies were clearly communicated to andunderstood by supervisors and workers
Paid complete production bonuses to workers who were breast feeding

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Working Hours
Excessive working hours is one of the most common and persistent issues we encounterat the factories that make our branded clothing. This issue is complicated and difficult toresolve for a variety of reasons, including:•

Factory managers may request overtime to meet tight deadlines or boost sales•

Many workers choose to work more hours to increase their pay•

Purchasing practices such as rush orders can lead to more overtime

Workers must be allowed to refuse overtime without any threat of penalty or punishment
and should not be required to work more than six days in a row. We require factories totake corrective actions to limit excessive overtime, which can include analyzing the root
causes of issues, adjusting production schedules and improving management systems.

Workers must be allowed to refuse overtime without any
threat of penalty or punishment.
Results
The issues below were identified at factories that supplied our branded clothing in 2013 – 2014.

Working Hours: % of Factories Not Complying with Gap Inc. Requirements% of Factories
Code of Vendor Conduct (COVC) Issue
2011

2012

2013

2014

Top 3 Sourcing Regions

1.6%

2.5%

3.3%

1.7%

All Sourcing Regions

2.2%

2.8%

3.3%

2.3%

Top 3 Sourcing Regions

17.7%

19.5%

27.5%

26.3%

All Sourcing Regions

15.5%

17.7%

24.1%

25.9%

Top 3 Sourcing Regions

984

955

952

968

All Sourcing Regions

1255

1178

1152

1083

Did not allow workers to refuse overtime

Did not provide 1 day off in 7

Number of Factories Assessed

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We identified a variety of reasons behind these issues, including:•Worker strikes or “hartals” in Bangladesh reduced working days and led to more
overtime hours.

•

Country issues in Bangladesh and China caused orders to shift to Vietnam from2013, which led to capacity issues and more overtime violations.

•

The rise of rural industrial areas in Vietnam contributed to labor shortages andovertime in urban factories.

We are working to address overtime violations that pose greater risks to workers’ rights
and well-being by evolving our factory ratings system and embedding sustainability moredeeply into our sourcing function and practices. Our updated factory ratings system,
implemented in the second half of 2015, identifies and increases penalties for more
serious violations. More than 24 hours of overtime per week is penalized as a severe
issue, and overtime greater than 32 hours per week is considered a critical violation,
the most serious level. We also recognize that further integrating sustainability into oursourcing practices can play a key role in limiting any contribution our purchasing practices
may have on excessive overtime.

Wages and Benefits
An important area of focus for us has been ensuring that the people who make our
products are paid what they are owed for their work. Factories may fail to fulfill thisobligation for a variety of reasons, such as not paying sufficient overtime premiums or
making illegal deductions from workers’ pay. In some cases, underpayments can be hardto detect or go unnoticed by workers, as pay calculations are complicated or may not beclearly communicated.

We have advocated to raise the legal minimum wage forworkers in certain sourcing countries, including Cambodia
and Myanmar.
To ensure workers receive the full wages and benefits they have earned, our field teamreviews factory records, interviews management and workers, and provides training on
policies and practices. This includes assessing such factors as production quotas andpiece rates, wage calculations and statements, contract terms, and leave and holidays.
We understand that companies like ours can play a role in influencing government policies
on wages and benefits. We have advocated to raise the minimum wage for workers incertain sourcing countries, including Cambodia and Myanmar.

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Results
The issues below were identified at factories that supplied our branded clothing in 2013 – 2014.

Wages and Benefits: % of Factories Not Complying with Gap Inc. Requirements% of Factories
Code of Vendor Conduct (COVC) Issue
2011

2012

2013

2014

Top 3 Sourcing Regions

18.1%

20.1%

19.4%

16.8%

All Sourcing Regions

15.5%

17.7%

17.4%

17.9%

Top 3 Sourcing Regions

15.0%

15.5%

16.3%

10.3%

All Sourcing Regions

14.3%

15.2%

16.1%

12.9%

Top 3 Sourcing Regions

984

955

952

968

All Sourcing Regions

1255

1178

1152

1083

Did not pay overtime and incentives as required

Did not provide understandable wage statement

Number of Factories Assessed

Our field team informed factory management about the lack of compliance with our COVC
requirements and the expectation that factories would take corrective actions to addressthese issues.
We are supporting several efforts that we hope may help enable factories’ to pay higher
wages to garment workers. These include partnering on the Project on Sustainable Labor
Practices in Global Supply Chains and promoting more sustainable, efficient garment
factories and mills in Southeast Asia.

Humane Treatment
Garment manufacturing can be a demanding business that puts stress on workers andsupervisors to meet production targets and other requirements. Supervisors may not haveenough training or experience in managing this pressure, constructively communicatingwith workers or understanding the nuances of appropriate behavior in the factory
environment.
Our field team observes how supervisors interact with workers and interviews workers tocheck for any signs of verbal, psychological or physical mistreatment. These could include

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gapinc.com/sustainability37behavior or threats that punish or coerce workers or contribute to an intimidating or
humiliating working environment. Factories are expected to provide channels for workers
to express any grievances about the way they are treated, as well as training on how to
use them. They are also required to have a disciplinary process and take appropriate
action to address issues.

Results
The issues below were identified at factories that supplied our branded clothing in 2013 – 2014.

Humane Treatment: % of Factories Not Complying with Gap Inc. Requirements% of Factories
Code of Vendor Conduct (COVC) Issue
2011

2012

2013

2014

Top 3 Sourcing Regions

8.6%

10.6%

9.2%

9.3%

All Sourcing Regions

9.1%

10.0%

8.6%

10.6%

Top 3 Sourcing Regions

0.5%

0.4%

0.4%

0.5%

All Sourcing Regions

0.5%

0.3%

0.3%

0.6%

Top 3 Sourcing Regions

984

955

952

968

All Sourcing Regions

1255

1178

1152

1083

Did not prohibit verbal or psychological abuse or coercion

Did not prohibit physical punishment or coercion

Number of Factories Assessed

Humane Treatment: Examples of Issues and Corrective Actions at Garment Factories (2013-2014)
Code of Vendor Conduct (COVC)

Corrective Actions

Issue Examples:by Factories Included:
Developed a policy on appropriate behavior to protect workers’ rights
and well-being

Supervisors engaged in improper verbal or physical

Conducted training sessions for all supervisors and staff to stop andconduct toward workers

prevent cases of improper verbal or physical treatment of workers
Implemented more effective communication channels between workers
and management

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Our field team observes how supervisors interact withworkers and interviews workers to check for any signs of
verbal, psychological or physical mistreatment.
Fire & Building Safety
Fire and building safety in the global apparel industry depends on a number of factors,
including local laws and regulations, building practices, the technical capabilities of local
experts and the actions of suppliers and brands. Unique issues come up in different partsof the world – for example, in Bangladesh, factories tend to be housed in taller buildings,
which complicate exit routes in the case of urgent situations.
Our field team works to improve fire and building safety by checking that factories:•

Maintain sufficient fire alarms, clearly marked exits and emergency lighting that allow
workers to safely evacuate•

Conduct evacuation drills•

Keep all doors, aisles, exits and stairwells clear, accessible and unlocked during
working hours•

Maintain and charge fire extinguishers that are visible and accessible to workers in allareas of the factory

In Bangladesh, we are helping to improve fire and building safety in the country’s garment
industry through our role in the Alliance for Bangladesh Worker Safety. Learn more in thesection on Designing Country Strategies on page 57.

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Freedom of Association
We feel strongly that the people who make our clothes have a right to advocate for theirrights and well-being. Many have limited experience working at garment factories or
exercising their rights, and they often have few other options for earning steady income
to support themselves and their families. In addition, the limited rule of law in many
developing countries often provides fewer protections for workers’ rights.
We understand that workers’ opportunities to voice their concerns often depends onother factors, including good relations with management and the support of other workers
or a trusted intermediary. We support the rights of workers and employees to freedomof association and collective bargaining through our Human Rights Policy and Code ofVendor Conduct.
We encourage open dialogue between workers and managers, as well as collaboration
with workers’ rights groups and trade unions. By partnering with the ILO and otherstakeholders, we support training and capability building programs such as Workplace
Coordination Committees.

We encourage open
dialogue between workers
and managers, as wellas collaboration withworkers’ rights groups
and trade unions.
Grievance Mechanisms
We strive to ensure that the people who make our clothes can raise concerns about
any improper labor practices or working conditions and seek appropriate remedy. We
require factories to provide a confidential and anonymous channel for workers to express
any grievances that protects them from retaliation. Factories must have a process foraddressing grievances in a timely manner that includes documenting grievances andactions that management takes to address them. Our field team trains factory workers
and managers on establishing and using grievance mechanisms. If our team identifies any
issues, we require factories to implement corrective action plans.

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Learn more about how we have helped factories implement grievance mechanisms in
Bangladesh and Myanmar in the section on Designing Country Strategies on page 57.
Going forward, we are focusing on improving factories’ capabilities to implement properly
functioning grievance mechanisms and ensure workers are able to use them to advocate
for their rights and well-being. We are also evaluating ways to use mobile technology tohelp protect human rights and empower the workers who make our clothes. For example,
such technology could offer an anonymous platform for workers to provide direct, realtime feedback about labor practices and could educate workers about their rights.

We support factories in creating effective grievancemechanisms to ensure that workers can advocate for theirrights and well-being.
Driving Business Integration
For more than two decades, our team of specialists has strived to improve
working conditions for the people who make our clothes. While we havemade significant progress, we also realize that we have to go further.
To create lasting, wide-scale change, our sourcing team and brands also need to play
active roles. By doing so, they are enabling us to integrate sustainability more deeply into
our business, a key stage in our strategy to create greater impact.
Our teams are finding new ways to collaborate every day, including the setting of sharedsustainability goals. They are also taking an integrated approach to measuring theperformance of our suppliers across all dimensions that are important to us, from working
conditions to environmental performance.
To support this work, we created a sustainability forum at Gap Inc. that brought
together some of our most senior leaders across the company to explore new ways ofcollaborating. The forum established a new way of working across our teams – from
infrequent, formal gatherings to day-to-day partnership across a wide variety of issues.
We’re now exploring how to take this collaboration to the next level, including joint
ownership of long-term, ambitious goals that are approved and owned by leaders
throughout the business.

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For the first time in 2014, our sustainability and sourcing teams set – and achieved –shared goals, including:•

100 percent adherence to our updated Unauthorized Subcontracting (UAS) policy•

Closing of 90 percent of critical issues and 50 percent of other open issues at 181
low-performing red factories•

Development of complementary 3-year plans for both teams for 2015-2017

Focusing on Strategic Suppliers
Building closer relationships with a smaller, select group of suppliers plays a key rolein embedding sustainability into our sourcing practices and supplier relationships. Thisapproach allows us to focus our resources on suppliers that have the greatest alignment
with our sustainability and business goals. In addition, we believe these partnerships lead
suppliers to take more ownership and initiative, which translates into better results for thepeople who make our clothes and our business.

Building closer
relationships withstrategic suppliers plays
a key role in embedding
sustainability into oursourcing practices.
Our approach includes creating a Supplier Leadership Program to support and reward
suppliers who meet our business and sustainability goals. The program will provide
training and incentives to suppliers that meet targets for improved social, environmental
and product performance. Over time, we believe that suppliers and factories that takeownership of their sustainability programs will realize business benefits and thereby need
fewer external assessments and incentives.

Results
We sourced 52 percent of the unit volume of our branded clothing from factories ofpreferred suppliers in our top three sourcing regions as of the end of fiscal 2014. The
corresponding figure for factories of all preferred suppliers of our branded clothing was 56

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42percent of unit volume. We plan to use these figures as a baseline for tracking our share ofsourcing from preferred suppliers going forward.
Our increasing focus on a smaller set of preferred suppliers is also reflected in a 14 percent
reduction in the number of assessed factories that supplied our brands from 2011 – 2014.
This data also reflects consolidation in the overall apparel manufacturing sector.

Assessed Factories Supplying Branded Apparel to Gap Inc.
2011

2012

2013

2014
% Change# offactories% offactories# offactories% offactories# offactories% offactories# offactories% offactories

2011-14

Top 3 Sourcing
Regions

984

78%

955

81%

952

83%

968

89%

-2%

All Sourcing
Regions

1255

Region

1178

1152

1083

-14%

Eliminating Unauthorized Subcontracting (UAS)
While subcontracting is a common practice in the apparel industry, engaged in bysuppliers to manage production capacity and fulfill large orders, it can pose a risk to
our reputation and the well-being of the people who make our clothes. Unauthorized
subcontracting is problematic because suppliers may outsource production to facilities
that we have not approved and that do not uphold our requirements for safe, fair labor
practices and working conditions.
Expanding the collaboration between our sustainability and sourcing teams can help us
address UAS issues since incidents can be difficult to detect through the periodic factoryassessments conducted by our sustainability field team. We take extra precautionary
measures in countries with high risk of UAS, such as specialized training for suppliers andfactory management.
If we encounter a UAS case, our field team promptly implements our Issue Escalation
Policy for High Risk Incidents, which calls for:•

Requiring the factory to immediately stop production•

Ensuring all goods (finished or unfinished) are returned to a factory approved by
Gap Inc., segregated and held until the issue is resolved

Gap Inc. | Global Sustainability Report | People•

Leading an investigation to look for and address any critical issues•

Requiring the factory to register for management systems training

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Results
We resolved 100 percent of 35 UAS cases we identified during 2013 – 2014. To drive moreaccountability, we began imposing charge-backs for UAS violations in 2014, the proceedsof which were applied to fund collaborative initiatives to improve long-term social andenvironmental performance at apparel factories, including the Project on Sustainable Labor
Practices in Global Supply Chains and Better Work’s Workplace Cooperation Program.

We created a sustainability forum that brought together
some of our most senior leaders across the company to
explore new ways of collaborating.
Partnering with Factories
We know that even more than our policies and ideas for improving
working conditions, what really matters is how we put them into practice.
Each day, we strive to take actions that will lead to improvements – not just in the shortterm, but through the creation of long-term sustainable change. More than 20 years into
our journey, we are challenging ourselves to continue to innovate, address challenges in aholistic way and rigorously assess our progress so that we can identify new opportunities
The Short Storyfor creating change.

Factory Partnerships

Three core elements guide our approach:• We introduced a range of improvements,•

such as a detailed manual on our Codelegal and international standards for labor practices and working conditions andof Vendor Conduct.

• In partnership with Verité, we areworking to better understand the

support their efforts to fix any issues that we find.
•to empower them to improve management practices, give voice to their employees

our clothes.

collaboration with Better Work to
improve manager-worker relations.

• In 2014, our specialists resolved
nearly 96 percent of critical issues

Strengthening factories’ capabilities (“Capability Building”) – We help suppliers takeownership of their own sustainability by providing training and guidance designed

experience of people who make• We are building on our longtime

Assessing and fixing issues (“Assessment & Remediation”) – We help factories meetand internalize standards.
•

Building on the power of our connections – When factory employees are treated fairly
and work in safe conditions, they help us create better products and enhance factory
productivity and performance. These mutual benefits lay the foundation forsustainable change.

at low-performing factories.

• We are enhancing our data collection

In the past few years, we have done a thorough reassessment of our approach to working

and analysis to drive greater progress.

with factories, laying the groundwork for further progress. We have introduced a range of

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improvements as well as innovative programs to better understand the experience of thepeople who make our clothes and make sure that their voices are heard. Investments that
we will be implementing over the next several years include:•

Partnering with Verité to enhance the degree to which workers feel valued,committed and engaged at work:o

Verité will independently assess suppliers – through on- and off-site interviews		of factory employees – to provide recommendations on improving our program		and addressing any open issues.

o		

Our collaboration centers on listening to workers’ voices: How are they treated?
Do they feel negatively or positively about their jobs? What would they like to		see improved?
oIn addition, we will be sharing our own human resources best practices with		

suppliers, so that they can become preferred employers and create business		

benefits, such as higher retention and greater productivity.

o		•

to report on publicly.

Tailoring assessments to factory circumstances and needs:o		•

Verité will also be authoring an impact assessment of this program that we plan

By segmenting our factory base, we plan to allocate additional resources tofactories with more workers and greater complexity.

Introducing revisions to our Code of Vendor Conduct (COVC) requirements, throughthe creation of Gap Inc.’s COVC Manual and a revised Assessment Manual for our
supplier sustainability team:o

Our COVC manual is the primary training resource that helps our suppliers		

understand how to meet our sustainability requirements. This document outlines		

our expectations with regard to labor standards, working conditions and the		environment, among other issue categories, and allows them to proactively		address any issues.

o

Our Supplier Sustainability Assessment Manual, which is based on industry

		best practices, outlines the protocols our team uses to assess and remediate		any COVC compliance issues at factories.

•

Incorporating the use of mobile technology to engage and empower the workers whomake our branded clothing by:
o

		
o
		
o

Collecting intelligence on factory practices and issues and providing a grievancemechanism for workers to express any concerns
Improving our capability building programs by measuring their impacts on
workers, as well as factory practices and conditions
Delivering information that can help increase workers’ knowledge, productivity

		and happiness

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Assessing & Approving Factories
We require all manufacturers of our branded clothing to sign Vendor ComplianceAgreements that include complying with our Code of Vendor Conduct (COVC). Our COVC
lays out our standards for working conditions at the factories that make our products, andwe invest significant resources in its enforcement.
We require factories to post our COVC in a location that is regularly accessible toworkers. Our COVC posters are translated into 27 local languages where our branded
clothing is manufactured.

We strive to become more
effective at identifying andcorrecting issues, which
can be hard to detect,even for a well-trainedand experienced eye.
We continually strive to become more effective at identifying and correcting issues, which
can be hard to detect, even for a well-trained and experienced eye. In addition, newissues often arise after others have been fixed. While we do not own any of the factories
that manufacture our branded clothing, we recognize our responsibility to help ensure thatfactories uphold our social and environmental standards.

Results•

We assessed labor practices and working conditions at 97.4 and 99.6 percent of theactive factories that supplied our branded clothing in 2013 and 2014.

•

Of our factory assessments, 52 and 53 percent were unannounced in 2013
and 2014.

•

We evaluated 240 and 163 new factories in 2013 and 2014.

More data are provided at gapinc.com/sustainability.

Better Work Program
One of our most significant collaborations over the past 15 years has been the Better
Work (BW) program. Led by the International Labor Organization (ILO), BW is a multistakeholder collaboration that creates a joint approach to monitoring factories. In 2001,

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we helped form Better Factories Cambodia, which later expanded into BW. And wecontinue to work in close partnership with the ILO, sitting on its advisory board andpiloting BW in new countries, including Bangladesh.
We partner with BW in countries where the program operates. The program focuses onprotecting worker rights and well-being by helping companies and governments upholdthe ILO’s core labor standards and national labor laws. It leads factory assessments andhelps address and remediate issues in BW countries. We also partner with and support
the ILO on initiatives and programs in some countries where we conduct our own factoryassessments or use third-party assessors, including Myanmar.

Results•

BW assessed 128 – or 44 percent – of the factories that make our branded clothing
in BW markets in 2014, including 77 percent of factories in Cambodia.

•

In Vietnam, BW conducted 36 percent of assessments and Gap Inc.’s field teamperformed 64 percent. The work of expanding BW in Vietnam has taken somewhat
longer than anticipated, which explains the relatively large share of assessments still
conducted by Gap Inc. in 2014.

•

In Indonesia, BW performed 24 percent of assessments, while Gap Inc.’s field teamconducted 76 percent. BW Indonesia has had limited staff and mostly operates in
the greater Jakarta area and a few other cities in West and Central Java. The programis voluntary and enrollment is based on the discretion of factory management.

Factory Assessment & Remediation in Better Work Markets (2014)
Factories Audited by Better Work

Factories Audited by Gap Inc.

Country# of factories% of factories# of factories% of factories

Total

Cambodia

51

77%

15

23%

66

Haiti

4

100%

0

0%

4

Indonesia

21

24%

66

76%

87

Jordan

5

100%

0

0%

5

Lesotho

2

100%

0

0%

2

Nicaragua

2

50%

2

50%

4

Vietnam

43

36%

78

64%

121

Total

128

44%

161

56%

289

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Factory Ratings
Factory ratings help us gauge progress in improving working conditions – and they also
play a crucial role in integrating this work more deeply into our business. Ultimately,
we aim to use ratings as an input into our sourcing decisions, similarly to how we rate
factories based on the quality and cost of their product. For this reason, we continuallywork to improve our approach to ratings. In the past few years, for example, we began
looking more closely at the severity of specific issues such as overtime, so that we canbetter assess where to focus our resources.
Our ratings also provide the framework for other critical aspects of this work. They help
to establish targets for factory performance on labor practices and working conditions,facilitate dialogue with managers and support our ability to work with factories to create
continuous improvement.

Factory ratings help
us gauge progressin improving working
conditions and play a
crucial role in integrating
sustainability more deeply
into our business.
We use a color-coded system to rate factories’ performance. High-performing factories
with no or few key violations receive a dark or light green rating. Average performers are
rated yellow, while factories that need improvement on one or more serious issues are
assigned a red rating. Key violations, such as excessive hours, have greater negative impact
on a factory’s rating than “non-key” violations, such as first-aid kits not being fully stocked.

Results
Overall, the share of high-performing dark green-rated factories decreased, while theshare of yellow- and red-rated factories increased somewhat during 2013 – 2014.
This finding spurred us to investigate further and take steps to reverse this trend. For
the first time in 2014, our sustainability and sourcing teams came together to set – andachieve – a shared goal to address issues at red-rated factories. We succeeded inresolving 96 percent of critical issues and 81 percent of other open issues at all lowperforming factories in this category.

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In addition, we are continuing to invest in new programs such as our work with Verité, andwe have evolved our rating methodology to more accurately assess factory performanceand focus our time on the most critical issues. By the end of 2020, we have set a goal tohave no red-rated strategic suppliers for our branded apparel.

Overall Factory Ratings for Suppliers of Branded Clothing
All Regions

2011

2012

2013

2014

Dark Green

15.9%

16.1%

13.4%

12.2%

Light Green

34.2%

36.1%

32.6%

32.9%

Yellow

34.3%

34.7%

39.0%

36.2%

Red

15.6%

13.1%

15.0%

18.7%

# of factories

1255

1219

1152

1107

Three regions – Greater China, South Asia and Southeast Asia – accounted for 89 percent of
the unit volume of branded clothing sourced from suppliers in 2014.

Factory Ratings for Top 3 Sourcing and Other Regions

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Greater China

2011

2012

2013

2014

Dark Green

14.1%

10.8%

9.4%

8.1%

Light Green

31.0%

34.4%

33.4%

36.0%

Yellow

35.6%

32.4%

39.8%

34.4%

Red

19.3%

22.4%

17.3%

21.4%

# of factories

326

343

329

308

South Asia

2011

2012

2013

2014

Dark Green

8.6%

8.7%

8.5%

6.6%

Light Green

31.6%

35.2%

33.4%

31.1%

Yellow

41.3%

47.9%

46.1%

44.0%

Red

18.6%

8.1%

12.0%

18.2%

# of factories

361

332

317

302

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Southeast Asia

2011

2012

2013

2014

Dark Green

17.5%

14.6%

9.8%

8.2%

Light Green

39.7%

42.4%

31.4%

27.8%

Yellow

30.3%

30.2%

38.9%

41.4%

Red

12.5%

12.9%

19.9%

22.7%

# of factories

297

295

306

331

Other Regions

2011

2012

2013

2014

Dark Green

25.8%

36.9%

33.0%

38.0%

Light Green

35.4%

31.3%

32.0%

40.4%

Yellow

28.0%

24.9%

26.5%

15.1%

Red

10.7%

6.8%

8.5%

6.6%

# of factories

271

249

200

166

We have evolved our rating methodology to moreaccurately assess factory performance and focus on
the most critical issues.
Our factory ratings reflect the following circumstances in several of our key sourcing countries.
•

In South Asia, worker strikes or “hartals” in Bangladesh reduced working days andled to more overtime hours. The increase in red factories in Bangladesh over the past
several years reflects an evolution in our methodology – as we refine what we arelooking for, we expect to find more issues. In addition, as the country’s garment
industry continues to evolve, new issues surface even as others are addressed. We
view red factories as a priority and the visibility they afford as a key tool in working
to create a stronger and safer garment industry in Bangladesh.

•

In Southeast Asia, labor shortages in Cambodia and Vietnam contributed toovertime issues. Vietnam instituted a new labor law in March 2013 that led to anincrease in issues identified in late 2013 and 2014. In addition, most of the factories
we have registered in the Better Work program are located in Cambodia, Indonesia
and Vietnam. Better Work assessments are more resource-intensive and tend to
identify more issues, which contributes to lower ratings.

•

Our sourcing needs called for greater use of supporting factories for printing,embroidery and laundry, which tend to have more issues than other factories.

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50Helping Fix Issues at Factories
One of the tenets of our approach to partnering with factories is that we work to fix
what we find. This means we have a comprehensive process in place to address issues.
Specifically, we work with factories to agree on specific, time-bound plans to correct
issues that do not meet our requirements for legal compliance, labor and working
conditions, and management practices. We have devoted additional resources to fixing
key issues at factories that pose higher risks to workers’ rights and well-being as wellas our business.

We continue to work in close partnership with theInternational Labor Organization, sitting on its advisoryboard and piloting Better Work programs in new countries.
We monitor progress through follow-up visits and on-site meetings with unions if they
are present in a factory. We also collaborate with local stakeholders to help identify andaddress factory issues when they may have more direct access and influence. This often
leads to corrective actions that improve working conditions and protect workers’ rights.

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Results
We closed 96 percent of critical open issues and 81 percent of non-critical open issues at red-rated factories in 2014.
For all rating levels, 70 and 68 percent of issues open at the beginning of fiscal 2013 and 2014 were resolved within six months.
91 and 94 percent of issues were corrected by the end of fiscal 2013 and 2014.

Resolution of Factory Code of Vendor Conduct Issues Open as of 1/31/2013
2/1/2013

5/1/2013 (3 months)

8/1/2013 (6 months)# of open

issuesissuesGreater China

1049

430

59%

234

78%

68

94%

45

96%

South Asia

792

517

35%

334

58%

122

85%

54

93%

Southeast Asia

953

537

44%

274

71%

40

96%

19

98%

Other Regions

217

137

37%

51

76%

34

84%

21

90%

Total

3011

1621

46%

893

70%

264

91%

139

95%

% resolved

issues% resolved# of open

2/1/2015 (2 years)# of open

Sourcing Country# of open

2/1/2014 (1 year)

issues# of open% resolved

issues% resolved

Resolution of Factory Code of Vendor Conduct Issues Open as of 1/31/2014
2/1/2014

5/1/2014 (3 months)

8/1/2014 (6 months)

Sourcing# of open# of open

Country

issuesissues

1086

680

37%

244

78%

58

95%

1300

859

34%

426

67%

145

89%

1438

932

35%

535

63%

82

94%

249

211

15%

116

53%

46

82%

4073

1621

60%

1321

68%

264

94%

Greater
China
South Asia
Southeast
Asia
Other
Regions
Total

Gap Inc. | Global Sustainability Report | People% resolved# of open

2/1/2015 (1 year)

issues% resolved# of open
issues% resolved

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Strengthening Factories’ Capabilities
To create wide-scale, sustainable change, we know that we must go beyond assessing
and fixing issues at factories – we must support our suppliers in strengthening their own
management. For this reason, capability building programs are an important focus for us
in helping factories create lasting improvements.
While we have helped suppliers improve their capabilities for close to a decade, we saw aneed to focus our efforts and create a more structured program. In 2013 – 2014, we created
two separate field teams for social and environmental capability building that are dedicatedto helping suppliers manage and improve the sustainability of their own operations.

To create wide-scale, sustainable change, we must
support our suppliers in strengthening their own
management practices.
For example, we provide training on good management practices, freedom of association
and anti-corruption. We have also helped garment factories and fabric mills perform
environmental impact assessments and share good practices by using the Sustainable
Apparel Coalition’s Higg Index. We aim to achieve both reach and scale with our capability
building efforts, enabling suppliers to share training programs, management systems andbusiness processes with managers and workers across all of their factories.
Learn more about our work in Bangladesh, Cambodia and Myanmar in the section on
Designing Country Strategies on page 57.

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53Collecting Better Data
Data is essential to realizing our vision to create long-term, sustainableimprovements in working conditions. Beyond helping us gauge ourprogress, it reveals trends, points to new questions and highlights
opportunities to advance our efforts in the future.
Most of all, the data we collect offers critical insights that affect real people. Under what
conditions are they working? What challenges do they – and we – continue to face? What
are the levers for creating greater change?
We know that good data will help us take our efforts to the next level, and in 2014 weinvested in creating a new Data & Insights team within our global sustainability group. This
team was initially tasked with assessing our current approach to collecting data and rating
factories that make our products. The team has since made some important changes
to our methodology and built a new data system that we believe will enable us to makegreater improvements to working conditions in the future.

Data is essential torealizing our vision
to create long-term,
sustainable improvements
in working conditions.
New Factory Ratings
Rethinking our approach to factory ratings started with a critical question: How could
we best address our low-performing, red-rated factories? In looking more deeply into
these factories’ performance, we discovered that overtime violations were the largest
single reason that their ratings dropped. But the data gave us an incomplete picture. It
did not reveal the severity of violations or track progress at the factories with the mostserious issues. In addition, factories that did make improvements had to wait a potentiallysignificant amount of time before seeing the benefits of their efforts, since our factoryratings were based on a weighted average that could cover a period of up to four years.

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54Based on these findings, our team revised our ratings systems so that we could better
identify and address more serious issues, while rewarding the progress that factories
make on improving labor practices and working conditions.

Rethinking our approach to factory ratings started witha critical question: How could we best address our
low-performing, red-rated factories?
New Data System
Our team also worked with a third party to enhance our approach by creating acustomized system that we can use to capture and analyze data for our updated factoryratings. This new system, which we implemented in 2015, allows us to look at the severityof issues as well as the connections between working conditions and key businessmetrics, such as employee retention, worker productivity and product quality. In addition,
we will be able to manage data on the environmental performance of our suppliers andour own facilities. As part of this new system, suppliers will be able to self-report on theirsocial and environmental performance.

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Building New Collaborations
As we work to improve working conditions for the people who make ourclothes, many of the issues that we face touch on systemic challenges
that defy easy solutions. How can we best help to combat poverty or
increase economic opportunity throughout the world? We know that we
can’t answer these questions on our own and have consistently looked
for new ways to collaborate with others.
We formed several new partnerships in 2013 and 2014, which focus on complex,
structural challenges affecting labor-management relations at garment factories, alongwith the well-being of workers in the global apparel industry.

“We invest in initiatives that will be transformative for our industry, ourbusiness and the people our business touches. Our legacy of commitment
to sustainability, doing business responsibly, and improving conditions forfactory workers is intrinsically part of that transformation.”– Sonia Syngal, Executive Vice President, Global Supply Chain and Product Operations

ILO Better Work Workplace

Cornell Project on

Cooperation Program

Sustainable Labor Practices

One major initiative is our partnership in

We are also helping to launch a new

ILO Better Work’s Workplace Cooperation

initiative at the Cornell University School

Program in Bangladesh, Cambodia, Haiti

of Industrial and Labor Relations, a leader

and Jordan. This initiative aims to help

in the study of work, employment, labor

workers and managers jointly resolve

policy and practices both nationally andworkplace issues and engage in respectfulinternationally. We have made a two-year

collaboration. We believe it will help togrant of $750,000 to support the launch ofprevent future disputes, resolve problems

the school’s Project on Sustainable Labor

more effectively, give greater voice toPractices in Global Supply Chains, whose

workers and improve productivity andvision is to promote dialogue between

competitiveness. For example, one focus

multiple stakeholders to create moreof the program is to help break down thesustainable labor practices, especially inhierarchical dynamic between male middle

the garment sector.

managers and female garment workers.

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It also addresses the need to involve and

The project’s approach is distinct indisseminate information to all workers, notstarting with research about what has

just the few who serve on committees.

worked – and not worked – in the variety
gapinc.com/sustainability56

of approaches that have been taken byunions and civil society, will then explore

both the private and public sectors toinnovative approaches that are grounded

improve working conditions. Stakeholders

in research and hold the potential to bringfrom diverse backgrounds, including

about greater change.

representatives of suppliers, labor

The Short Story

Country Strategies• While many of our regional strategies
are consistent, we localize our approach
to fit different cultures and needs.

Designing Country Strategies
The challenges involved in improving working conditions vary greatly bycountry, and achieving lasting change requires us to shape our approachbased on unique economic, political, business and cultural circumstances.

• We helped form and lead the Alliancefor Bangladesh Worker Safety.

For this reason, we have developed a country-specific approach to assessing risk and• The Alliance’s work has included

creating strategies to improve our work in factories. These assessments include social,extensive factory inspections andpolitical and environmental data, along with risk indices and expert analysis. They also

worker training on fire safety.

draw on the insights we have gathered through ongoing engagement with a variety of• In Cambodia, we have actively

external stakeholders and business partners.

supported freedom of association andpartnered with the International Labor
Organization’s Better Factories

Bangladesh

Cambodia program.

In April 2013, one of the worst tragedies

make improvements to worker safety inin the history of the global apparel industry

Bangladesh, focusing on fire and building

from worker groups, government andtook the lives of more than 1,100 garment

safety. Laying out binding commitments,

others to craft our approach toworkers at the Rana Plaza factory complex

the Alliance has funded and implemented

outside Dhaka, Bangladesh. The country’s

a range of actions to create tangible

garment industry encompasses somechange within specific time frames. It is

5,000 factories, less than 70 of which arealso dedicated to measuring progress andapproved suppliers for Gap Inc. While we

openly communicating about results.

• In Myanmar, we have sought input

improving working conditions.

did not source any products from factories
at Rana Plaza, we were deeply affected

One of the key tenets of the Alliance’s

by this tragedy and, like others throughout

work is to engage workers in improving

the world, felt a sense of urgency inthe garment industry in Bangladesh. It

preventing such a devastating event fromhas conducted both surveys and off-

occurring again.

site interviews with more than 3,200
Bangladeshi workers in 28 representative

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Within months of the Rana Plaza

factories to obtain their input andcollapse, we helped form the Alliance forperspective on fire and building safety

Bangladesh Worker Safety (“Alliance”).

issues. These insights have been used to

The Alliance brings together a range

develop better solutions and have beenof apparel companies and brands toshared openly as a public resource.

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Another important idea guiding the work

complex issues that affect the safetyof the Alliance is that creating lasting

and well-being of the country’s garment

improvements requires a dual strategy. At

workers. These include inadequate

the same time that it is addressing specificregulations and enforcement, weaksafety issues inside factories, the Alliancelabor laws and a shortage of technicalis also working to address the broader,capabilities and experience.

The challenges weencounter vary greatly bycountry and often call for
adjusting our approach to
fit local economic, political,
business and cultural
circumstances.
The second Alliance Annual Report detailing progress was issued in September 2015. Key
achievements and highlights from the report on the Alliance’s first two years include:•

Inspecting 100 percent of factories that create products for member companies
to assess structural, fire and electrical safety, with inspection reports published on the
Alliance website•

Training of more than 1.1 million workers in fire safety•

Verifying ongoing remediation efforts at over 500 factories•

Expanding the Alliance worker helpline (Amader Kotha) to more than 400 factories;
since inception, the helpline has received more than 20,000 calls•

Providing financial compensation to more than 6,000 workers who were displaced or
unable to work due to factory inspections and closures for improvements•

Making $100 million in low-cost financing available to factories and creating two
credit facilities with the International Finance Corporation (IFC) and USAID•

Launching occupational safety and health committee pilot projects withILO Better Work at factories

In the future, the Alliance will continue to work with governments, brands, local tradeassociations, civil society and other stakeholders to build on the progress made to date.
Most importantly, we are committed to helping to ensure that this work leads to lastingchange for Bangladesh’s garment workers and industry.
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Cambodia
To help improve labor practices and

Gap Inc. and our suppliers also helped

working conditions in Cambodia, we haveincrease awareness among garment

made it a priority to encourage freedom

workers and employers about preventingof association for the country’s garment

and resolving labor disputes in Cambodia

workers and support programs thatby supporting the AC radio learning

engage workers and help to improve risks

program in 2014.

to their well-being.
We have conducted training on preventing
The country’s eight major union federations

unauthorized subcontracting (UAS)

and the Garment Manufacturers

with Better Factories Cambodia at all of

Association of Cambodia negotiatedour approved factories. Our field teama Memorandum of Understanding

provided a training update on UAS(MOU) that tasked an independent

prevention to all factories in July 2014.

Arbitration Council (AC) with reviewing

We confirmed and resolved one UAS

and arbitrating labor disputes between

case where an unauthorized factory

workers and factory owners. We haveclosed without making proper severance

actively supported the AC as a platformpayments to workers. Following several

for peacefully resolving disputes between

months of negotiations with Gap Inc. andworkers and suppliers. When unions

local labor groups, the alleged supplier

have raised concerns about suppliers notprovided settlement to the affected workers.

complying with AC decisions, we haveinformed factory management of our
expectation that they respect and follow
any AC awards.

“The garment industry has been a key vehicle for economic growth,
attracting foreign investment and creating opportunities for many
Cambodians to supplement their family incomes. Providing suchopportunities, however, is only a half measure if laborers are subjected
to poor conditions or are treated unfairly.”– William E. Todd, U.S. Ambassador to the Kingdom of Cambodia

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We also support and collaborate on a number of initiatives with the ILO’s Better Factories
Cambodia (BFC) program, which we helped form in 2001, including:•Training – We sponsor training programs on management systems, compensation
and benefits to help prevent issues that affect workers’ rights and well-beingfrom reoccurring.

•Experts by Experience Initiative – We helped fund BFC’s response to incidents ofgroup fainting in Cambodia’s garment factories. The program: 1) develops
mechanisms to hear workers’ perspectives and insights; 2) helps workers understandthe issue; and 3) provides knowledge on prevention and appropriate responses.

•

Food Provision Program – We support BFC’s research on the impact of nutrition in
the garment industry, with the goal of establishing scientific and empirical links
between nutrition and productivity.

•

One Change Campaign – We helped fund and strongly encouraged suppliers toparticipate in the campaign for factories to adopt one or more changes inmanagement practices from BFC’s designated list.

We have also partnered with CARE International to implement the Gap Inc. P.A.C.E.
program for advancing female garment workers in Cambodia since 2009.

We have made it a priority to encourage freedom of
association for Cambodia’s garment workers.
Myanmar
In 2014, after careful deliberation, Gap Inc.

To understand the local context, we held

became the first U.S. retailer to source

meetings and engaged in dialogue withapparel in Myanmar since sanctions were

civil society and worker organizations in

lifted by the U.S. government in 2012.

Myanmar, U.S. government agencies,

Myanmar’s long period of economic

the ILO and international NGOs withisolation, early stage of development

specialized expertise in Myanmar. Theseand minimal rule of law contribute toconsultations helped us identify how

the country’s generally low level of laborhuman rights, regulatory and politicalpractices and working conditions. We took

issues affect workers and our business.

extra measures to fully account for the

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challenging local circumstances and set a

We implemented an annual risk

high standard that could help to improveassessment process to identify, evaluate

the overall sustainability of Myanmar’s

and address risks at the country andgarment industry.

industry levels on an ongoing basis. Thisgapinc.com/sustainability

60

process uses a combination of data, risk

and working conditions at the two

indices and expert analysis to assess andfactories in the country that currently

respond to changes in the country’s social,supply our brands. We also chose topolitical and regulatory environments.

voluntarily submit public reports on
our sourcing activities under the U.S.

We have collaborated closely with factory

government’s Responsible Investment

management, workers and third-party

Reporting Requirements.

experts, including the ILO and Verité, tosubstantially improve labor practices

Partnering with factory
management, workers andthird-party experts led to
substantial improvements inlabor practices and working
conditions at our suppliers’
factories in Myanmar.
While changes take time and we still have work to do, key improvements and initiatives at
the two factories we work with in Myanmar include:•

Developed policies and procedures to address under-age hiring, lack of leave andinappropriate disciplinary practices•

Reduced excessive overtime hours and corrected overtime wages•

Partnered with the ILO and U.S. government to provide training on freedom of
association and social dialogue to improve worker-management relations, dialogue
and issue resolution•

Provided remedy mechanisms for workers who were mistreated by supervisors•

Implemented new grievance policies and procedures, including training on
workplace conduct and grievance channels and an investigation process foraddressing concerns•

Implementing the Gap Inc. P.A.C.E. program in factory and community settings
in Myanmar

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Working for Greater Equality
and Opportunity
When Doris and Don Fisher founded our company in 1969, they madehistory not just by offering a new way to buy jeans, but by working as
equal partners.
At a time when women were often limited to taking a back seat to men, Doris stood rightalongside Don in opening our first store and running our business – and together, they
established a commitment to equality that continues to inspire and guide us today.
To us, celebrating individual style goes hand-in-hand with having deep respect for every
individual. One of our core beliefs is that we can only thrive in a world in which all people
have the chance to do the same. And by working to live up to the standard of equality set
by our founders, we can unlock limitless possibilities – both for the people touched by ourbusiness and for our company.

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The Short Story

Equality& Opportunity• Through such actions as raising our
minimum wage and being a voice

When we pay people fairly and treat our employees with dignity and respect, they are
inspired to be their best. In turn, they provide us with a stronger pool of talent and help usdeliver better products and experiences to our customers. When our business succeeds
and grows, we can support even more employees and become a stronger voice for equality
and human rights beyond Gap Inc. As one of the world’s largest apparel retailers, we see

against discrimination, we seek toan opportunity to stand alongside others and work toward greater fairness for everyone. By

create greater equality.

taking a public position on these issues – for example, by calling for equal pay for women• We became the first Fortune 500
company to announce that we pay

and an end to discrimination against the lesbian, gay, bisexual and transgender (LGBT)
community – we can help to shape a broader conversation and create cultural change.

women and men equally for equal work.

• After we announced plans to raise ourSupporting opportunity for women – inside and outside Gap Inc.

minimum wage for 60,000 employees,

Creating greater equality starts with how we act within our own company and treat our own

other companies followed.

people. A prime example centers on women, whose role has profoundly shaped who we• In 2015 we spoke out againstare. Women made up 74 percent of our worldwide employee base in 2014. We’re proud

discrimination toward the lesbian, gay,bisexual and transgender (LGBT)
community.

that women serve as a majority of our global store managers (73 percent), and comprisea majority of our senior leadership. Eight of our company’s eleven senior leadership teammembers are women, and four of our five brands are currently led by women.

“I started out with Gap Inc. 24 years
ago, working as an associate store
manager, and now feel fortunate
to stand with three other womenleaders of our brands. For Gap Inc.,
honoring equality and the value of
every individual is not just part ofour company’s DNA, it makes us abetter company.”– Andi Owen, Global President, Banana Republic

We know that these women are in their roles because they happen to be the best people
for the job – and have the right to be treated equally to their male counterparts. We
engaged a third party to verify and became the first Fortune 500 company to disclose that
we pay female and male employees equally for equal work around the world – whether
dollar for dollar, pound for pound, yen for yen, or euro for euro. This is far from a given. In
the U.S., for example, a woman makes 78 cents for every dollar a man earns. National
Equal Pay Day represents how far into the current year many women must work in order

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EQUALITY + OPPORTUNITY

60,000+to close the gap from their previous year’s earnings. This year, the date fell on April 14.
We were pleased to confirm that women and men at Gap Inc. are paid equally – but our
ambition goes even further. By making a public statement about this issue, we hope toencourage other companies to follow suit, thereby bringing about broader change.

EMPLOYEESWe led our industry and raised theminimum wage to $10 for 60,000+
US employees in 2015. We were also
the first Fortune 500 company todisclose that we pay female and male
employees equally for equal work.

Likewise, in 2014 we were one of 10 companies to sign onto the “She Works” Clinton
Global Initiative Commitment to Action to enhance job opportunities for women aroundthe world.1 Led by the World Bank Group’s International Finance Corporation, thispartnership seeks to create new jobs for more than 300,000 women over two years. As
part of our commitment, we signed the Women’s Empowerment Principles, developed by
UN Women and the United Nations Global Compact. Designed to offer practical guidance
to business, the principles cover such areas as women’s professional development andthe need to publicly report on progress about gender equality.

“Investing in women’s employment is not only the right thing to do—it’salso essential for business. Companies that develop and retain women
employees will gain a huge competitive advantage. Increasing women’s
economic participation and productivity can also be a game-changer intackling poverty and boosting shared prosperity—our two corporate goals.”– Jim Yong Kim, President, World Bank Group announcing the “She Works” Clinton Global Initiative Commitment to Action
in September, 2014

Beyond these steps, we made a commitment that members of our senior leadership,including our CEO, Art Peck, would speak publicly at least twice a year about theimportance of women’s employment as a smart business strategy. We strongly believethat our commitment to equality for women gives us a competitive advantage, helping us
attract top talent, increase engagement and retention and connect with our customers, amajority of whom are women around the world.
For these reasons, creating opportunity for women is not just deeply embedded in our
culture, but integrated into our business. In 2007, for example, we launched our P.A.C.E.
program to help the women who make our clothes gain the skills and confidence toadvance both at work and in life. In September 2015, we announced a major
expansion of P.A.C.E., with the goal of reaching one million women throughout the world
by 2020. The women of P.A.C.E. have created change not just for themselves, but theirfamilies and communities – and in turn they have helped to strengthen our company in a
number of ways.

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Raising hourly wages – and sparking broader change
We have taken action on other issues in the past year when we believed we could make adifference, not just within Gap Inc. but more broadly, through the connections that link allof us in working toward greater equality. In early 2014, we announced that we would raise
the minimum hourly wage for over 60,000 Gap Inc. employees, a step we hoped would
help individual people while strengthening our business, enabling us to attract top talent,
help our employees perform at their best, and increase productivity and retention.

As one of the world’s largest retailers, we see anopportunity to stand alongside others and work toward
greater fairness for everyone.
We also saw an opportunity to make a public statement that could help spark morewidespread change. At the time of our announcement, hourly wages were a charged
political issue, and we wanted to demonstrate that the private sector could be part offorging solutions. Our pay increase attracted significant media attention – as well as acallout by President Barack Obama – and since then, a number of other companies haveincreased their minimum hourly wages as well.

Speaking out against discrimination
Earlier this year, we spoke out about another issue that did not involve Gap Inc. directly,
but we viewed as affecting the lives of all of us – from our employees to our customers toour business partners to our fellow citizens. Like others, we felt concerned by a wave oflegislation being introduced in a variety of states that would allow for discrimination against

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65members of the LGBT community. These bills would permit individuals and businesses
to use religion to challenge or opt out of laws that protect people from discrimination in
employment, housing, business and public accommodations.
We believe that none of us enjoys real equality unless all of us do – and inclusion is a core
principle that shapes our identity as a company, as well as how we run our business. We
were inspired to add our voice to a rising chorus of protest against these laws. Our CEO,Art Peck, joined the CEO of Levi Strauss, Chip Bergh, to write an open letter “calling on
retail and apparel companies, and other businesses, to join us in speaking out against
legalized discrimination.” The letter called the legislation being passed in Indiana and otherstates not just bad for business, but “fundamentally wrong,” and concluded, “At Gap Inc.
and Levi Strauss & Co., we are proud to say we are open to business for everyone.”

We believe none of us
enjoys real equality unless allof us do – and inclusion isa core principle that shapes
our identity, as well as how
we run our business.
In the wake of online campaigns and boycotts against Indiana after passage of its law
last March, state legislators began talking about making an amendment to protect theLGBT community. Ultimately, they added language barring discrimination based on sexual
orientation and gender identity for the first time in Indiana’s history. For us, this experience
underscored what can be accomplished when people come together – and how as acompany we are linked, through our beliefs and actions, to so many others.
We feel extremely fortunate that some of our brands are among the most recognized in
the world – and along with this status comes responsibility. Individuality and equality lie
at the heart of what we do as a company. Every piece of clothing starts with someone’s
creative vision, and it winds up being worn as part of someone else’s personal expression.
We know that we can only succeed in a world in which every person is respected as both
unique and equally valued. As a company, we will continue to work to live up to this visionof equality, one that ties us to our roots and also inspires us to look forward and find new
ways to create positive change.
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Advancing Careers
We strive to develop a diverse pipeline of talent and provide employeeswith the opportunities they seek to learn and develop, stay challenged
and take on new roles and greater responsibility.
We know our people and job seekers expect a path to new opportunities that rewards
them for their performance and the value they bring to our company. Offering our
employees challenging work that tests and builds their capabilities not only sets them up
for success it also makes our business stronger and more innovative.

Fifteen percent of Gap Inc.
executives at the VP+ levelin 2014 started their careers
as store associates.
The Short Story

Careers• We emphasize a growth mindset,

As a retailer that values hands-on experience in our stores, we invest in providing
opportunities for store employees to take on higher level field and corporate positions.

which we cultivate by promoting from

Some of our best examples of career growth are employees who started out at storeswithin and eliminating traditionaland rose through the ranks to senior management positions. Fifteen percent of Gap Inc.

performance reviews.

executives at the VP+ level in 2014 started their careers as store associates.

• Store employees can advance within
the field or into corporate positions;a number of our executives started
out as store associates.

• Old Navy provides entry-level job
seekers with free, web-based training

Many of our people stay at the company or come back because of the opportunities andrange of roles that our brands and business provide. It’s common for them to work for
multiple brands and functions during their careers. Employees at the manager level andabove average more than seven years with the company.

and coaching.

• Instead of reviews, employees
have frequent conversations that

We also recognize the need to look outside our organization to make sure we find thebest people for each role. We try to balance our internal promotions and external hires toprovide feedback and guidanceachieve the most productive mix of diverse talent, functional and subject matter expertiseon opportunities to develop.

and organizational fit.

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Old Navy Job Skills Partnership
Old Navy is committed to addressing the skills gap that makes it difficult for many U.S.
job seekers to obtain entry-level positions. The brand spent two years researching
employment issues in the retail sector and discovered that many people lack importantskills, leaving managers struggling to find enough well-qualified applicants.
To address these issues and help build a pipeline of retail talent, Old Navy partnered with
LearnUp, a San Francisco-based technology company that seeks to provide entry-leveljob seekers with job-specific training and coaching. Together, Old Navy and LearnUp ran
trials of a web-based training tool in San Francisco, Houston and St. Louis in 2015 before
rolling the program out to more than 350 stores. The tool’s interactive modules enableapplicants to learn the skills needed for sales associate roles at Old Navy and allows themto sign up for in-store interviews. The pilot results showed significant improvements in theratio of applicants interviewed to those hired (from 7:1 to 2:1), and stores received positive
feedback from candidates about their experience.

Old Navy is committed to addressing the skills gap thatmakes it difficult for many U.S. job seekers to obtainentry-level positions.
Building on their initial success, Old Navy and LearnUp have also launched a new initiative
called ‘LearnUp the Ladder,’ to provide free, online education for anyone interested inlearning the skills necessary to move from entry-level to leadership roles in the retail industry.

Living a Growth Mindset
In 2014, we did away with our traditional annual review process for employee performancein favor of a new system called “GPS – Grow. Perform. Succeed.” GPS replaces
annual reviews with frequent performance conversations and coaching sessions thatprovide employees with regular feedback and guidance on their work and development
opportunities. GPS helps employees develop and overcome challenges by promoting
continuous learning.
The GPS approach is based on the concept of a growth mindset, which was championed
by Stanford psychologist Carol Dweck. People with a growth mindset believe they candevelop the abilities to succeed through initiative and hard work. A growth mindset
contrasts with a fixed mindset where people believe their intelligence and abilities are predetermined traits that they do not have the power to change.

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68Learning and Development Model
We use a 70-20-10 model for career development that emphasizes learning throughreal work experiences and direct interactions with colleagues. Seventy percent of an
employee’s learning and development takes place on the job and is built into their goals,
and 20 percent occurs through mentorships and collaboration. Ten percent takes the formof courses or other formal training.
From onboarding new employees to grooming senior leadership, we offer employees
a variety of training opportunities to support their personal growth and development.
These range from online courses to in-person workshops and multi-day programs. A few
examples of programs that improve our business by promoting employee learning anddevelopment include:•

Retail Academy – a combination of classroom sessions, rotational training andbusiness simulations designed to develop the skills to advance and navigate theincreasingly complex and technology-driven retail space.

•

Adaptive leadership – a four-day development experience designed to help
employees build the strategic capabilities to improve their careers and meet thebusiness objectives for our brands.

People with a growth mindset believe they can develop
the abilities to succeed through initiative and hard work.
Results
We filled over 45 percent of open headquarters roles through internal hires in 2014. For
upper field sales positions that manage our stores, over 75 percent of open positions
went to existing employees. Most store associates are new hires.

Global Share of Open Positions

2011

2012

2013

2014

VP & Above

75%

60%

71%

57%

Director / Sr. Director

72%

65%

67%

65%

Manager / Sr. Manager

65%

56%

57%

60%

Store Management

57%

53%

53%

52%

Overall (including Store Associates)

15%

15%

15%

15%

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The Short Story

Diversity & Inclusion• Respect for every individual is core to
who we are.

• Diversity unlocks our innovation, helps
attract and retain talent, and builds

Embracing Diversity & Inclusion
We are committed to developing an inclusive, diverse workforce andpipeline of future leaders. Our business can only thrive if others have thechance to do the same, and our culture is based on a deep respect forevery individual.

connections with our customers.

• Currently, women make up 74 percent

We believe embracing diversity promotes creativity and innovation and helps to attract andof our employees and lead four of ourretain the best talent everywhere we do business. For our business to grow, our people

five brands.

also need to understand and embrace the wide variety of cultures that we increasingly• We have spoken out when members

encounter across our brands and store locations.

of the lesbian, gay, bisexual andtransgender (LGBT) community facediscrimination.

• Our six employee resource groups
foster understanding and connection
across a range of backgrounds andcultures at Gap Inc.

Promoting Equality
Creating opportunity for women is deeply embedded in our culture. From store managers
to division presidents, women have long played a key role in running and growing each of
our brands. Women make up 74 percent of our employees and currently lead four of our
five brands, including Old Navy, Banana Republic, Athleta and Intermix.

Embracing diversity
promotes creativity andinnovation. It also helps
to attract and retain thebest talent everywhere
we do business.
Our own experience and much external research show that more women participating inleadership roles results in better outcomes for our business and everyone it touches.
•

Companies across all sectors with higher female representation at the board level orin top management exhibit higher returns on equity and valuations (Credit Suisse, 2014)•

Companies with top-quartile representation of women in executive committees have,on average, 47% higher ROE and 55% higher EBIT (McKinsey, 2010)

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We believe in standing up for all forms of equality both inside and outside of our company.
This includes raising our voice in opposition to a wave of proposed legislation against
members of the lesbian, gay, bisexual and transgender (LGBT) communities, many ofwhom are also likely to be our customers, as well as future and current employees.
Our commitment to equality and diversity is embedded in our Code of Business Conduct,
which includes a zero tolerance policy for any form of discrimination, harassment or
retaliation. This policy applies to our directors, employees, applicants, customers andbusiness partners (including independent contractors and suppliers).

We believe in standing up for all forms of equality both
inside and outside of our company.
Embracing the Next Generation
To build our business and provide opportunities to youth, we are committed to developing
an inclusive, diverse workforce and pipeline of future leaders. Our recruiting efforts include
attending and supporting minority job fairs. Gap Foundation’s youth programs provide
internships and job opportunities to marginalized youth from underserved areas.
Our ASCEND program recognizes diverse store leaders and corporate employees who
demonstrate the capability, desire and potential for career advancement. ASCEND
includes access to mentoring opportunities that help empower employees to succeed andenable the company to support the development of future leaders.

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Employee Resource Groups
Gap Inc. employees from diverse backgrounds have taken the initiative to develop a
number of Employee Resource Groups, which provide opportunities for cross-culturallearning, mentoring and relationship building. These groups organize development,
networking and volunteering events. They provide employee input and support on internal
initiatives, as well as offering consumer perspectives and product feedback that help Gap
Inc. in the marketplace. In addition, they use their knowledge of various countries andcultures and foreign language skills to support global aspects of our business. In return,engaged employees get experience networking, gaining visibility, and meeting leadersacross the company.

To expand opportunities
for youth and build
our business, we arecommitted to developing
an inclusive, diverse
workforce and pipelineof future leaders.
Our newest Employee Resource Groups, GapWIL and M-Suite, were recently formed tohelp meet the needs and develop emerging women leaders and recognize the growingrole of Millennials in our business. Over 2,000 people have participated in these six
programs annually:

Gap Inc. | Global Sustainability Report | People•

African American Networking Group (AANG)•

Asians Supporting Inclusion and Awareness (ASIA)•

Gap Gay Employees, Allies & Resources (GEAR)•GapWIL (Women in Leadership)•

Honoring Our Latino/Hispanic Ancestry (HOLA)•

M-Suite (Millennials)

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Results
In 2014, 51 percent of our full-time and part-time (non-seasonal) employees in the U.S. classified themselves as white and 49
percent identified as ethnically diverse.

Gap Inc. Owned Facilities
U.S. Ethnic Breakdown

2011

2012

2013

2014

All

57%

54%

53%

51%

Management

75%

75%

75%

74%

New Hires

57%

53%

51%

49%

All

6%

6%

6%

6%

Management

8%

8%

9%

9%

New Hires

5%

5%

6%

6%

All

17%

18%

19%

19%

Management

6%

7%

6%

6%

New Hires

18%

22%

23%

24%

All

17%

18%

18%

20%

Management

9%

9%

9%

10%

New Hires

14%

15%

16%

17%

All

3%

4%

4%

4%

Management

1%

1%

1%

1%

New Hires

5%

5%

5%

5%

All

43%

46%

47%

49%

Management

25%

25%

25%

26%

New Hires

43%

47%

49%

51%

White

Asian

Black

Hispanic

Other Minority

All Minorities* U.S. full-time and part-time, non-seasonal employees. Data on ethnic diversity not available outside the U.S.
(*We only track data on ethnically diverse employees in the U.S. Due to differences in country regulations and reporting, we do not have similar data for other countries.)

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We monitor and assess the balance of women and men across our business.

Global Gender Representation

2011

2012

2013

2014

Women

49%

47%

49%

46%

Men

51%

53%

51%

54%

Women

59%

59%

59%

59%

Men

41%

41%

41%

41%

Women

61%

60%

61%

60%

Men

39%

40%

39%

40%

Women

69%

69%

69%

68%

Men

31%

31%

31%

32%

Women

71%

70%

70%

72%

Men

29%

30%

30%

28%

Women

73%

73%

73%

74%

Men

27%

27%

27%

26%

VP & Above

Director / Sr. Director

Manager / Sr. Manager

Store Management

New Hires

Overall

U.S. promotion rates for women exceeded those of men at the VP & Above and Manager/Senior Manager levels for three out of thelast four years.

U.S. Promotion Rates by Gender & Position

2011

2012

2013

2014

Women

12%

3%

8%

8%

Men

7%

7%

3%

5%

Women

9%

7%

12%

9%

Men

7%

7%

9%

11%

VP & Above

Director / Sr. Director

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Manager / Sr. Manager
Women

11%

14%

13%

13%

Men

9%

14%

14%

13%

Women

7%

7%

7%

7%

Men

7%

7%

7%

8%

Women

7%

7%

7%

7%

Men

7%

7%

7%

8%

Professional

Overall

Caring for Our Employees
We know that financial incentives, work-life integration and benefits all playa key role in providing employees with what they need to make the mostof their professional and personal lives, for themselves and their families,
as well as our business.
Hourly Wages and Equal Pay
We were one of the first Fortune 500

the same for the same work around thecompanies to increase our U.S. minimum

world, from San Francisco to Tokyo.

hourly rate. The increase took effect in
two stages, first to $9 beginning in June

Rewarding Performance2014 and then to $10 from June 2015.

By providing financial incentives that

We believe the benefits of raising wages

reward strong performance, we help to

Flexibility & Benefits

far outweigh the costs. By analyzing

attract and retain talent and grow ourdata across our U.S. store locations, webusiness. All employees at the manager• We support our employees in a range

determined that increasing the hourly

level and above are eligible for a yearlywage above previous levels to $9 per hourbonus – which increases for higher level

led to a substantial increase in the volume

positions – that is based on a combinationof applicants and significant improvementof company and individual performance.

in the retention of hourly store employees.

Employees at the Director level and above

The Short Storyof ways, from 401K matching towellness programs to family support.

• We raised the hourly minimum
wage to $10 for 60,000+ U.S.
employees following our January

can also receive shares of Gap Inc. stock.

2014 announcement.

Women have long played a key role in our

We re-evaluated and revised our bonus

and extensive benefits support

business, and we believe strongly in equal

structure in 2014 to better align each

employees in creating a thriving future.

pay for equal work. We became the first

employee’s bonus with the company’s

Fortune 500 company to publicly confirm

overall business performance.

• Our rewards for strong performance• We offer flexibility programs toaccommodate different life phases.
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that we pay male and female employees
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Work-Life Integration & Benefits

scheduling programs that shift the

For many of our employees, the ability

emphasis from where and when work is

to adjust their work schedules unlocks

conducted to the results delivered. This

greater productivity, engagement andtype of results-driven model enables

retention. We offer a variety of flexibility

employees to adjust their schedules andprograms to help employees balance their

the way they work to suit their personal

professional and personal lives.

needs and circumstances.

A number of departments offer flexible

Rewards for performance,
work-life integration
and benefits all play a
key role in helping our
employees lead more
fulfilling professional
and personal lives.
Other programs are designed to accommodate the different life phases and needs of ouremployees and their families, from raising children to taking care of elderly parents.
•

Nationwide family support program – U.S. full-time and part-time employees have
online access to child, elder and pet care resources. Full-time employees also benefit
from back-up childcare and priority access to nationwide childcare centers.

•

Leave programs – U.S. employees can take extended time off from work to manage
the demands of their family and personal lives.

•

Phase in/phase out – Employees can temporarily reduce their work hours before,
during or after maternity or family leaves of absence.

Employees also receive a number of additional benefits that make up a significant portionof their overall compensation package. These include a variety of financial, health andwellness, lifestyle and community benefits that are intended to help our people and theirfamilies lead healthier, more productive lives.
•

Health and wellness benefits include:o

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Full medical, dental and vision coverage for full-time employees

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•Financial benefits include:
o

		
o
		
•

GapShare 401(k) plan matches employees’ contributions dollar-for-dollar up to
4 percent of base pay with 100 percent immediate vesting
Employee Stock Purchase Plan (ESPP) enables full-time and part-time
employees to purchase Gap Inc. stock at a 15% discount quarterly

Work-life balance and lifestyle programs include:oGenerous amounts of paid time off (PTO) that increase with promotion

		and seniorityoEmployee Merchandise Discount Program that gives full-time and part-time U.S.

		

employees up to 50% off at Gap and Banana Republic and 25% off at Old Navyo•

Wellness programs, commuter benefits, and tuition reimbursement

Community Investment Benefitso		

The Gap Foundation matches or supplements employees’ contributions ofmoney or time to local nonprofits

Improving Hourly Scheduling
For store and other hourly employees, scheduling practices can affect daily
routines and the ability to meet family obligations. We’re working to develop
more stable, flexible scheduling that responds to our employees’ needs
and makes our business stronger.
Over the past year, each of our brands

for improving scheduling stability andhas evaluated their scheduling practices

productivity. The pilot tests a new

to determine where we may be able toscheduling system that gives hourly

improve scheduling stability and flexibility

employees more stable hours and greaterfor our hourly store employees, while

control over their schedules. The projectcontinuing to drive productivity in stores.

also aims to evaluate the business impact
on stores’ turnover, absenteeism andWe launched a pilot program with U.C.

productivity. Components of the pilot

Hastings’ College of Worklife Law inprogram include:

2014 to design and assess practices

Gap Inc. | Global Sustainability Report | People•

Building more advance notice into schedules•

Experimenting with different approaches (e.g., testing fixed hours or shifts)•

Developing technology that empowers store associates to swap shifts

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During the summer of 2015, the heads

Additionally, each of our brands committedof our stores announced a sharedto improving their scheduling policies tocommitment to eliminate the use of on-callprovide their store employees with at least

shifts across our global organization. All

10 to 14 days of advance notice. All Gap

five of our brands aligned on a complete

Inc. brands plan to phase in advanced

phase-out of on-call scheduling by the endschedules by early 2016.

of September 2015.

All of our brands havecommitted to improving
their scheduling policies
and providing store
employees with atleast 10-14 days ofadvance notice.
Working Safely
We strive to prevent and promptly address any work-related injuries to
employees. Gap Inc. has a centralized online reporting system that tracks
all incidents and injuries.
The information is analyzed at leastis required to address these risks.

quarterly to assess risks and develop

Gap Inc.’s independent Internal Audit

prevention measures. Our internal claims

department audits health and safety risks

team and safety department analyzes

and processes. Results are integrated

recurring injuries or issues to determine

into the performance evaluations andif changes need to be made to current

compensation of relevant personnel.

policies or practices or more training

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Listening to Employees
To create a more productive, inclusive work environment and retain top
talent, we seek feedback from employees on how we are doing, where we
can improve and what makes our people proud to work for Gap Inc.
Gap Inc.’s overall employee engagement

regularly include: integrity and ethics ofindex and scores on specific questions

colleagues, reputation as an employer,

consistently exceed external benchmarks

commitment to the community andby a wide margin. Reasons employees

commitment to social and environmental

cite for being proud to work for Gap Inc.

responsibility.

For many of ouremployees, the ability
to adjust their work
schedules unlocks greater
productivity, engagement
and retention.
Results
Employeesatisfaction

Unit

Employee% of satisfied

satisfaction

employees

Data% of total

coverage

employees

2011

2012

2013

2014

80

80

82

82

61

68

64

69

We are currently adjusting our method for assessing employee engagement andsatisfaction. This includes developing a new approach that makes a more directconnection between employee attitudes and behavior and our business results.

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Building Stronger Communities
What does selling clothes have to do with helping teenagers find theirway in life? How can it open up opportunities for women who haven’t hadaccess to education? Or unleash the potential of volunteers who give theirtime and talent to their communities?
Our founders, Doris and Don Fisher, started asking these kinds of questions when they
opened the first Gap store in 1969, and we are still asking them today. We know thatby running our business, we can create opportunities for people in communities aroundthe world. More and more, we recognize that our company is only as strong as thecommunities we’re part of, and we also believe that whenever an opportunity is createdfor one of us, it unlocks benefits for all of us.
From the start, the Fishers lived this philosophy, and their lifelong and tireless dedication to
the community dates back to long before they started our company. Over the years theyGap Inc. | Global Sustainability Report | People

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The Short Story

Communities• We focus on creating opportunities for

set a high bar for the rest of us. Don sat on the board of the Boys & Girls Clubs of San
Francisco from 1963 until his passing in 2009. Doris is not just a business pioneer, as awoman who co-founded one of the world’s largest apparel retailers; she helped pioneer

women, teens and young adults, anda vision for how companies could make a difference in people’s lives. For Doris, who is aour own volunteers.

leader in supporting education and the arts, a commitment to the community has always• We leverage core strengths to create
benefits for all, including our business.

• More than 2,000 teens and young

been highly personal. She still sends handwritten thank-you notes to our volunteers andremains an active – and passionate – trustee of the Gap Foundation Board.

adults have participated in our

The legacy of the Fishers is one of connection, of knowing that a company truly succeeds

This Way Ahead job training andwhen it helps others succeed as well. This way of thinking is not about giving back,internship program.

but investing in a stronger future for all of us. When we provide the women who make• We recently committed to educate
one million women through P.A.C.E.

• In 2014, Gap Inc. employees
volunteered more than 558,000 hours.

our clothes with opportunities to gain new skills, they bring their increased abilities andconfidence to their jobs, helping to create better products. When our employees volunteer
to prepare teens and young adults for their first jobs, they enhance their own skills by
mentoring and leading others. We also create a stronger pipeline of potential talent andcustomers, as they grow up to become successful adults. Over time, the connections
between us become stronger, as each of us can achieve bigger goals together than we
could apart.

We recognize that ourcompany is only as strongas the communities we’repart of, and we also
believe that wheneveran opportunity is createdfor one of us, it unlocks
benefits for all of us.

Our co-founders, Doris & Don Fisher

We believe that to thrive, businesses and communities need to work together, and we aim
to work strategically by focusing on programs that leverage our core strengths. We think
we can make the biggest difference by advancing women, teens and young adults, andthrough supporting volunteers.
Each of these areas is deeply linked to our history and culture as a company. Women
have played an essential role at Gap Inc. from the moment that Doris Fisher helped open

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WOMEN’S ADVANCEMENT

our doors. Teens and young adults have been more than important customers of ourbusiness; we have given hundreds of thousands of them their first jobs. Volunteering has

1,000,000

WOMEN

By 2020, we will expand Gap Inc.
P.A.C.E. to more factories andcommunities to give women
worldwide the opportunity togain the skills and confidence
to change their lives.

been so central to who we are – made part of our DNA by our founders – that many of ouremployees say it is a reason they join and stay at Gap Inc.

Committing to educate one million women throughout the world
In 2007, we launched Gap Inc. P.A.C.E. (Personal Advancement & Career Enhancement)
to provide opportunities for the women who make our clothes to gain the skills andconfidence they need to advance at work and in life. More than 30,000 women in
10 countries have participated in the program to date, and in September 2015, we
committed to continue to expand beyond factories and into communities to reach one
million women throughout the world by 2020.
Many women say P.A.C.E. has not just taught them tangible skills, but shifted theirperception of themselves and their abilities. They describe becoming better atcommunicating, managing their finances, taking care of their health and planning for the
future. Each woman has her own story to tell about the change she has experienced –whether in her own life or that of her family and community.

Giving teens and young adults the chance to prepare for adult life
A first job is not just a milestone – for many young people, especially those with limited
opportunities, it can be life-changing. Beyond taking on new responsibilities and learning
new skills, working for the first time can profoundly shape someone’s goals and prospects
for the future. One prominent study found that teens who worked while in high school had
annual earnings later on that were 22 percent higher than those who did not 2. Our job
training and internship program, This Way Ahead, aims to provide this experience to lowincome teens and young adults by sharing what we know first-hand – what it takes for ayoung person to succeed at work.

“This Way Ahead is nothing short of life-changing for the participants and
Gap Inc. employee volunteers. Teens and young adults experience a criticalrite of passage – their first paid job – and we see them start to view the future
differently. And our employees gain valuable skills while helping to change
the course of a young person’s life. It is a win-win for all of us.”– Gail Gershon, Executive Director, Community Leadership, Gap Foundation

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Launched in 2007, This Way Ahead builds on the powerful connections between our
employee volunteers, the young people we serve and the rich training ground that exists
within our stores. Participants – whom we recruit through our nonprofit partners – attend
workshops led by volunteers from Gap, Banana Republic, and Old Navy stores that equipthem with the skills they need to get – and keep – a job.

A first job is not just a milestone – for many young
people, especially those with limited opportunities,
it can be life-changing.
Over the course of two months, they dive into such topics as decision-making, goal
setting, presentations and conflict resolution, with the volunteers bringing these subjects
to life through interactive exercises and their own stories. Our employees share what
they have learned about career planning and the importance of education, and they
help participants explore a range of possible careers they may feel passionate about.
Graduates of the program have the opportunity to apply for paid internships in our stores,
where they can use their skills to navigate a real work environment.
In addition to This Way Ahead, we set out to change the lives of young people throughstrategic investments in a range of nonprofit organizations that focus on job preparation
for young people in the U.S., Canada, the U.K., France and Japan. The programs we
supported have reached approximately 90,000 teens and young adults each year over the
past three years. We are applying what we have learned to further refine This Way Ahead.

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YOUTH2,000+TEENS + YOUNG ADULTS

More than 2,000 teens & young adults
have received job training and store
internships through our This Way
Ahead program. Our investments in
nonprofit organizations have reachedover 270,000 youth in the past 3 years.

More than 2,000 teens and young adults have received job training throughThis Way Ahead so far, which is now running in five major cities in the U.S. – New York,San Francisco, Boston, Houston and Chicago – as well as three cities in the U.K.
We have found that because of the connections it creates, the program benefits everyone
involved, inspiring us to evolve it even further. One hundred percent of This Way Ahead
graduates have reported gains in maturity, conflict resolution and leadership. At the sametime, volunteers who have mentored participants have enhanced their own skills andbecome more motivated to advance their own careers. Our stores – and by extension
our brands – have hired many of the interns who have completed the program, and thisgroup has stayed on the job twice as long as their peers and scored 10 percent higher on
employee engagement surveys.

“The most valuable lesson I’ve learned is to ALWAYS have a positivemindset. I remember one of my coaches telling me, ‘Even when you’rehaving a bad day, always tell yourself that you will have a good day, andbelieve me, your day will be amazing.’ And from that day on, I’ve been
constantly living my life positively.”– Rhyanna Goodman, alum of This Way Ahead in New York City

In other words, as youth have learned valuable skills and landed jobs, we have gained
access to a strong pipeline of talent. Now, given the benefits to our business and young
people in our communities, our brands are eager to play a greater role in TWA, taking
it beyond the realm of Gap Foundation, which designed the program and oversees it.
Through the active participation of our brands, we are setting goals to hire many more
store associates from the program, thereby changing the life trajectory of thousands moreyoung people.
This evolution fits our broader sustainability strategy, which is comprised of three major
stages: creation, integration and impact. Ultimately, what we are working to achievethrough this strategy is the opportunity to change more lives – on a bigger scale and in a
way that is sustainable for the long term.

Supporting our volunteers as they help to change the world
We believe that volunteers offer not just their time, but creativity, skills and talent that
can’t be quantified and have the power to change the world. In 2014, we estimate that
Gap Inc. employees volunteered more than 558,000 hours in their communities, our

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VOLUNTEERS

highest number yet. That translates to countless moments – of patiently tutoring a child, or
outfitting a woman to prepare her for a job interview and the start of a new life, or managing

558,000

HOURS

Gap Inc. employees volunteered
558,000 hours in 2014 alone. This
new record was set with the supportof more than 2,000 Community
Leaders across the world, who lead awide range of volunteering projects
for their teams.

a critical task inside a nonprofit organization that there were simply no funds to cover.
To work more effectively, we support our volunteers in forming long-term relationships
with community organizations. Over time, they gain a better understanding of what anorganization needs and how they can make a difference. The organization gets to know
them too and can help volunteers become even more effective. This deeper connection,
we believe, leads to deeper impact.
Our Community Leaders are the heart and soul of bringing this vision to life. They serve
as key connectors in our communities, inspiring their teams to volunteer, leading thecharge by example, and fueling a movement that rallies all of us to get involved. We havemore than 2,000 Community Leaders in seven countries around the world, leading teams
throughout Gap Inc. in pursuing volunteer projects that hold unlimited potential to build
stronger communities.

“I love being a Community Leader because I enjoy creating opportunities forothers to fall in love with volunteering. It’s contagious, and we all have thecapacity to make positive changes in our community.”– Rachel Manning, Senior Marketing Manager, Athleta

Through our Community Leaders, our brands are not just engaged in these efforts, but
play a critical role in driving them. At Banana Republic, for example, our store teams
reached 100 percent volunteer participation in 2014, with all of them giving time and talent
to the community. Every year at Old Navy, our store volunteers run Camp Old Navy, a jobshadowing event that gives thousands of young people throughout the U.S. the chance togo behind the scenes and experience first-hand what it takes to operate a business.
As a global retailer, we are part of a global community, and we believe that each memberof a community thrives only when every other member has that same opportunity. We
have seen time and again that when we work to create change in people’s lives, theychange us too. Our community efforts have helped us create better products, develop astronger pipeline of talent, and become more innovative. Most of all, they have connected
us to the people who are touched by our business. These connections make us a better
company and inspire us to look for ways to make an even greater contribution to thecommunity in the years to come.

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COMMUNITY

Volunteer Programs$17,251,648
The total value of giving to thecommunity through employee
time and money, including
company match, in 2014

We provide our employees with a range of benefits for the time and money theygive to the community. These include:•

Field Team Grants – For every 25 hours a store team volunteers for youth
development or women’s advancement, they can request a $250 grant forthe community organization.

•

Money For Time – We donate $150 to the partner nonprofit for every 15
hours an employee volunteers after one year of work.

•

One-time and Recurring Payroll Donations – We match employees’ financial
donations to community organizations after one year of work.

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P.A.C.E. – Changing One Million Lives
Clearly expressing a point of view. Reframing problems as opportunities.
Managing a budget and taking steps to be healthier. Believing in yourself.
The Gap Inc. P.A.C.E. (Personal Advancement & Career Enhancement)
program launched to teach the women who make our clothes critical skills
for navigating life both at work and at home.
Now reaching women in community settings as well, the coursework and discussions
unlock new possibilities for women and shift their perception of themselves and theirabilities. As a result, many women say that P.A.C.E. has helped them become more
confident, leading them to set bigger goals and successfully work to achieve them.
More than 30,000 women in 10 countries have participated in the program since welaunched P.A.C.E. in 2007 – and in September 2015 we announced that we werecommitting to expand the program to reach one million women around the world by 2020.

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The Short Story

Gap Inc. P.A.C.E.
• We have committed to educate one
million women through P.A.C.E.

• P.A.C.E. provides women with skills
and confidence to advance their lives.

• The program initially focused on thewomen who make our clothes andhas expanded into communities.

• More than 30,000 women in 10
countries have participated to date.

• Evaluations document higher
self-esteem and productivity among
participants.

• P.A.C.E. is adding new curricula

Women who have participated in P.A.C.E. have stories to tell about change that are as
unique as they are. One worked up her courage to give a speech during the program,gaining a sense of pride she had never experienced. Another realized that she could makea difference by telling other women about her experience with breast cancer, inspiringthem to do self-exams and stay healthy. And yet another learned to better manage
her family’s finances, successfully reaching her goal to build her dream house with her
husband and two daughters.
These individual stories are linked to a bigger one as well – about the connections between
us that support all of us in reaching our fullest potential. When we help the women who
make our clothes and others who lack opportunities build their skills and confidence,
they can work toward their goals and become a catalyst for change in their families andcommunities. When they bring their enhanced abilities to their work inside garment factories,
they enable us to deliver better products to our customers – and more broadly, they help tocreate thriving communities in which our business, too, can thrive. P.A.C.E. also connects

focused on adolescent girls andthe people who make our clothes with the people who buy them. When customers buy ourbuilding women leaders.

clothes, they support our ability to create opportunities for even more women to advance.

Many women say that
P.A.C.E. has helped them
become more confident,
leading them to set bigger
goals and successfully
work to achieve them.
These connections are why our CEO, Art Peck, has said that P.A.C.E. not only advances
women but also propels our business, thereby making it more sustainable for the long term.
In addition to creating a workforce with more skills, P.A.C.E. enhances the productivity andperformance of our suppliers and deepens the sense of meaning and purpose among
our employees. On September 28, 2015, Art announced the expansion of P.A.C.E. at the
Clinton Global Initiative Annual Meeting in New York; two days later, nearly 500 employees
gathered in Times Square to unveil an art installation celebrating women in the program.
“It’s not an aspiration,” Art said of reaching one million women through P.A.C.E. “It’s not agoal, and it’s not an ambition. It’s a commitment. We will do this.”Gap Inc. | Global Sustainability Report | People

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PROGRAM PARTICIPANTS

Providing up to 80 hours of classroom learning
P.A.C.E. has its roots in a question that started us on one of the most rewarding journeys

10

in our history: How could our business provide new opportunities to the women who
make our clothes? We explored who they are, what their lives are like, and what would

COUNTRIES
Bangladesh
Cambodia
China
India
Indonesia

JordanMyanmar
Pakistan
Sri Lanka
Vietnamenable them to create change – for themselves, their families and their communities.
Even though eighty percent of garment workers worldwide are women, living in a wide
range of countries including India, Vietnam, Bangladesh, Cambodia and China, relatively
few advance to higher-level positions. Many have the capacity to do so but have lacked
access to education and the chance to acquire the skills they need for professional andpersonal growth.
Creating opportunities for women is a natural fit for our company. 74 percent of ouremployees are women, and so are over 70 percent of our senior leadership team,including four of our five brand leaders. As Art put it when he announced our P.A.C.E.
expansion, “We’re very committed to investing in women as a force around the globe.”

We began offering P.A.C.E. in community settings in 2013
to support women outside the factory environment. We
are now enhancing our approach even further to reachone million women throughout the world by 2020.
P.A.C.E. teaches the women who make our clothes critical skills for navigating life bothat work and at home – from clearly expressing a point of view to managing a budget toreframing problems as opportunities. We designed P.A.C.E. with two partners with a deep
understanding of the needs of the women we aim to serve: Swasti Health Resource
Centre, an international organization focused on public health outcomes for those whoare socially excluded or poor, and the International Center for Research on Women(ICRW), a global institute dedicated to empowering women. CARE has served as a key
implementing partner for the program.
Together, we created a comprehensive curriculum that includes 65-80 hours of classes
in as many as nine subject areas, such as communication skills, time and stressmanagement, problem solving and decision-making, financial literacy and more. Classes
for the women who make our clothes are held on site at factories with the supportof faculty provided by our suppliers, and they involve role-plays, exercises and open
discussion. Beyond teaching women tangible skills, P.A.C.E. shifts how many see
themselves and their abilities.

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Documenting our impact
To ensure that we are being effective, we believe it is critical that we evaluate how the
program is working. In 2013, ICRW published a report based on evaluations it conductedfrom 2009 to 2013 at six factories where P.A.C.E. had been implemented in India,
Cambodia, Vietnam, Bangladesh, and China. It found that participants in the program
felt they had greater confidence and stronger communication skills, and had learned theimportance of goal setting and managing their finances.
Overall, the share of participants reporting high self-esteem rose 49 percent by the end of
the program, while the share of those reporting high self-efficacy – or belief in their ability
to produce desired results through their actions – increased 150 percent. ICRW has also
tracked the long-term impact of P.A.C.E. through a follow-up study of some of the first groupof participants in India. It found that gains from the program have not just been sustained
over time, but deepened, as the women applied what they learned both at work and at
home, and they were able to transfer this knowledge to other women and family members.
ICRW continues to evaluate the program as it expands to new countries and settings.

“Many women who work in the garment industry,and others who have lacked opportunity andaccess to education, have the capacity andoften the desire to grow, learn, develop andadvance. I’ve found that these women speakof dreams that many of us share – to provide
a better life for themselves and their families.
It is our hope that through P.A.C.E., womencan come closer to fulfilling those dreams.”– Dotti Hatcher, Executive Director, P.A.C.E. Global Initiatives

Dotti Hatcher speaking at a P.A.C.E. graduation event

The documented business benefits of P.A.C.E. also support the program’s long-termsustainability. ICRW has found greater work efficacy among participants, such as theability to take initiative and demonstrate their abilities, as well as greater influence inthe workplace through stronger relationships, effective communication and other skills.
Our suppliers, who have partnered with us by investing in running the program, have
expanded on these findings. Conducting their own research on how P.A.C.E. impacts
their business, they have documented lower absenteeism, increased efficiency and higher
productivity. In Cambodia, for example, retention rates were 66 percent higher for P.A.C.E.
participants than other workers. And at a factory in India, productivity was 15 percent
higher for P.A.C.E. participants.

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These findings were reinforced by an academic study3 based on a randomized controlled
trial in five garment factories in Bangalore, India, operated by Shahi Exports, a Gap
Inc. supplier. Three thousand workers participated in the trial, with 1,000 selectedto participate in P.A.C.E. and the others serving as a control group. The study foundsignificant gains in efficiency among the P.A.C.E. participants, along with cost savings for
Shahi and personal benefits to the workers. The research showed that through gains in
attendance and productivity, P.A.C.E. can generate a positive return on the company’s
investment.

Expanding P.A.C.E. to one million women
The benefits of P.A.C.E. to multiple stakeholders encouraged us to innovate further by
expanding on the program’s design and delivery. Working with Swasti and CARE, webegan offering P.A.C.E. in community settings in 2013 to support even more women
outside the factory environment. We are now enhancing our approach even further as wework to achieve our goal to reach one million women throughout the world by 2020.

Overall, the share of P.A.C.E. program participants
reporting high self-esteem increased by 49 percent.
At the core of P.A.C.E. is the belief that every woman in the program is connected tomany more people – whether in her workplace, her family, her community and evenfar from her home – and this power of connection is also guiding how we think about
expanding the program’s reach. Because we believe that new collaborations hold the
key to bringing P.A.C.E. to more women, we are committed to partnering with othercompanies, industry leaders, non-governmental organizations, development agencies,

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91funders and others. To support our new partners, we will provide them with training andaccess to the P.A.C.E. curriculum.
And we are working to deliver P.A.C.E. to a much broader base of participants. Building
on our factory and community programs, we are creating a suite of learning programs
that will include a new offering for adolescent girls between the ages of 13-18, as well as
a new women’s leadership curriculum. Both are designed to meet the needs of womenand girls wherever they are in their lives. For younger participants, P.A.C.E. will provide
life skills education at a critical time in their personal development, when it could change
the trajectory of their lives. For women in the leadership program, P.A.C.E. will offer the
chance to deepen their development by focusing on such areas as managing vision andpurpose, influencing others, driving for results, and leading change.

“It’s not an aspiration,” ourCEO, Art Peck, said ofreaching one million women
through P.A.C.E. “It’s nota goal, and it’s not an
ambition. It’s a commitment.
We will do this.”
P.A.C.E. class in Myanmar

From the earliest days of Gap Inc., our founders, Doris and Don Fisher, had a vision tocreate opportunities for the people touched by our business. Through P.A.C.E., we havenow seen how this vision unlocks an endless loop of possibilities, as women who gain
access to education change not just their own lives, but those of many others. P.A.C.E.
has taught us valuable lessons – about what it takes to create social innovation and bringit to scale – but most of all it has inspired us about the potential for business to join withothers to help people everywhere advance their lives.

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Protecting Our Shared Environment
We view environmental issues as fundamental human rights issues.
People can’t live without clean air to breathe and clean water to drink.
And those who already face challenges due to poverty or lack of opportunity tend to suffer
the most from environmental harms, as their communities are often the most vulnerable
and have the fewest resources.
A healthy environment is also critical to our own survival as a company. We depend on
natural resources like water to make our products, and we also rely on the people who
make our clothes – if they cannot thrive in the communities where they live, neither can we.
The environment is shared by all of us, and it is imperative that we act together to protect it.
This urgency is heightened by current environmental threats, including those caused by
our industry. We are keenly aware that the environmental impacts of the apparel industry
are significant, including pollution and greenhouse gas (GHG) emissions. According to

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The Short Story

Environment• We view a healthy environment as ahuman right.

• We exceeded our latest goal toreduce our absolute U.S. greenhouseleading scientists, the primary cause of climate change is GHG pollution, produced bymanufacturing, transportation and energy consumption, among other factors.
Our current environmental approach centers on two main areas: climate change andwater. These are the issues where we see significant potential to positively impact people’s
lives – and they also hold a great importance to our business. In addition to needinggas (GHG) emissions, achieving aaccess to natural resources to remain viable in the future, we need to help ensure that33 percent reduction.

the people who make our clothes have access to clean water to sustain their health and• By the end of 2020, we commit towell-being. While they are each major focus areas on their own, climate change and water

reduce the absolute global GHG

issues are also linked, as scientists have documented that climate change affects water

emissions in our owned and operated

supplies in a number of ways. It has reduced the world’s freshwater, for example, and thefacilities by 50 percent from 2015 levels.

• We also commit to divert 80 percent
of waste from landfill for our U.S.
facilities by 2020.

warming of the planet’s atmosphere is leading to unpredictable shifts in annual runoff andprecipitation, as well as melting glaciers, more intense storms and impacts to agricultural
crops and other vegetation4.

• We frame our water strategy under
the umbrella Women + Water.

We see significant
opportunity to create value
for people, communities
and our business throughour environmental efforts.
We see significant opportunity to create value for people, communities and our businessthrough our environmental efforts. Because we are all affected by climate change, when
we reduce our greenhouse gas emissions, these actions ultimately affect everyone
touched by our business. The changes we make help to link our customers, employees,
business partners and communities in a common goal to protect the world we live in.
When we work to keep water supplies safe and clean in the communities where our
products are made, we support the health of the people who make our clothes, and inturn they are able to contribute to our health as a company.
Our strategy to address climate change is focused on reducing our greenhouse gas
emissions, a commitment that we have been working toward for the past several years.
In 2010, we set a goal to reduce our absolute greenhouse gas (GHG) emissions from our

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U.S. operations by 20 percent by 2015 from a 2008 baseline. We are pleased that we
exceeded this goal ahead of schedule – achieving a 33 percent reduction.
With this report, we are announcing two ambitious goals. We commit to a 50 percent
absolute reduction of greenhouse gas emissions in our owned and operated facilities
globally by 2020. We also commit to divert 80 percent of waste from landfill for our U.S.
facilities by 2020. In addition to conserving resources, decreasing our waste through efforts
like recycling also helps offset climate change by reducing the gases produced from thebreakdown of material in landfill, as well as the energy used to produce new goods.

We commit to a 50 percent
absolute reduction ofgreenhouse gas emissions
in our owned and operated
facilities globally and 80 percent
waste diversion from landfill for
our U.S. facilities by 2020.
Our new goals represent an important shift from our past approach, which was morecautious and measured. The first GHG goal we set in 2003 called for an 11 percent
reduction in energy usage per square foot in the U.S. by 2008. Our next goal raised the bar
by looking at absolute GHG emissions, and we set a bigger reduction target of 20 percent.
Both of these goals helped to galvanize efforts across Gap Inc., and we delivered goodresults. But the urgent reality of climate change has caused us to re-think our approachand strive toward more aggressive, science-based targets. We believe that the health of
our environment depends on bolder and bolder action across all segments of society, fromgovernments to companies to environmental organizations to consumers. If we can achieve
our new goals, we’ll make a much more meaningful difference. And if other companies set
bigger reduction targets as well, the collective impact could be very tangible.
To achieve these bigger goals, we are working to increase our energy efficiency throughsuch improvements as better lighting in our stores and to reduce our waste going tolandfill by collaborating with our landlords and other mall retailers to improve recycling
capabilities. We recognize that none of these changes on their own are enough – but thesum of all our efforts played out across the scale of our business operations can create

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gapinc.com/sustainability95real change. Every improvement in our policies, practices, processes and decision-making
helps, and we believe that taken together, these actions have the potential to drive results
we haven’t created to date.

In addition to needing access to natural resources toremain viable in the future, we need to help ensure that thepeople who make our clothes have access to clean waterto sustain their health and well-being.
In the past few years we have also evolved our approach to water, which builds on our core
belief that environmental issues are human rights issues. The basis of our strategy lies in two
critical facts – first, that 80 percent of the people who make our clothes are women, andsecond, that much of the burden of water stress falls on women as well. For these reasons,we frame our approach to water issues under the umbrella of Women + Water. Our strategy
is to focus our efforts on supporting women’s well-being and to address the use of waterin our supply chain – for example, by working toward the goal of having zero dischargeof hazardous chemicals by 2020. Our strategy has a number of components, ranging
from partnering with our fabric mills to improve their practices to building awareness andeducation around safe water handling practices among the women who make our clothes.
While addressing both climate change and water issues poses significant challenges, we
also believe we can make a difference for the people touched by our business. The need forpeople everywhere to work together to create a healthy environment is not up for debate,
nor is it optional – for any of us. We feel an urgency to act to protect the resources that weall share and depend on to create a better future.
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Doing Our Part on Climate
Climate change is a global challenge that transcends boundaries, affecting
people and communities everywhere.
We view it as both an environmental issue and a human rights issue, as it poses a threat
to such basic needs as having clean air to breathe and a safe environment to live in.
What’s more, people who face the challenges of poverty or lack of opportunity are often
most affected by environmental harms and have the fewest resources with which to cope.
Few issues carry such an urgent need to come together to forge solutions.
We know that climate change holds the potential to impact our business, as well as
the many people throughout the world whose lives we touch. And we feel an ethicalresponsibility to address this issue. The apparel industry causes significant environmental
impacts, including greenhouse gas (GHG) emissions. Our company can only thrive
in a world with abundant natural resources and a healthy environment that supports
the wellbeing of all of us. We also believe that addressing climate change benefits our

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The Short Storybusiness, making us more efficient and enhancing our connection with customers,

Climate Change

employees and other stakeholders. When we reduce our energy usage and emissions,• We view climate change as bothan environmental and a human

we are not just doing our part, but becoming part of something bigger – a global effort tosolve one of society’s most critical challenges.

rights issue.

• By the end of 2020, we commit toOver time, we have set increasingly ambitious goals to address our environmental

reduce the absolute global GHG

footprint. With this report, we are going much further than in the past, committing to a 50

emissions in our owned and operated

percent absolute reduction of GHG emissions in our owned and operated facilities globallyfacilities by 50 percent from 2015 levels.

by 2020. We also commit to divert 80 percent of waste from landfill for our U.S. facilities in• We also commit to divert 80 percent
of waste from landfill for our U.S.

the same period. Both of these goals will require us to significantly increase our efficiency
through such innovations as real-time monitoring of the energy use in our stores.

facilities by the end of 2020.

• These goals require that we take new

These goals also represent a shift in our thinking. Whereas before we took a measured

approaches to increase our efficiency.

approach, now we feel a more pressing need to act. The International Panel on Climate
Change declared in 2014 that, “Human influence on the climate system is clear, and recent
anthropogenic [caused by human activity] emissions of greenhouse gases are the highest
in history.”4 We believe that the health of our environment depends on bolder and bolder
action across all segments of society – from governments to companies to consumers.

Our company can
only thrive in a world
with abundant natural
resources and a healthy
environment that supports
the well-being of all of us.
As one of the world’s largest apparel retailers, we recognize that our size brings added
responsibility, and it also presents greater opportunity to make a difference. While eachof the changes we are making would not be enough on its own, the sum of our efforts –across the scale of our business operations – holds the potential to create real change.
Every improvement in our policies, practices, processes and decisions helps, and webelieve that taken together, these actions can drive results we haven’t produced to date.
This impact can be multiplied as other companies set bigger reduction targets, leading toa greater collective ability to mitigate climate change.

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CLIMATE

Since setting our first carbon reduction goal in 2003, we have learned a great deal thathas helped us shape our approach to making environmental improvements. For example,-50%
EMISSIONS

We view access to a healthy
environment as a human right —and we've set ambitious goals for
2020, including a 50% absolute
reduction of greenhouse gas
emissions in owned and operated
facilities globally.

we see the need to act both inside and outside Gap Inc. so that we address our own
impacts while working toward broad-based change. In addition, we recognize the needto continually look at our operations with fresh eyes, so that we uncover new ways to
become more efficient. And we are developing a long-term strategy to address theenvironmental footprint of our supply chain, where we have less influence but see great
potential to help create a positive impact.
In all the areas we are focused on, we are at a critical juncture in mitigating ourenvironmental impacts. Achieving our goals by the end of 2020 won’t be easy, as we willneed to make new investments, find new approaches and adopt new ways of operating.
But the challenges that the world faces demand that we take our efforts to this next stageof commitment. While we don’t yet have all the answers to how we will achieve our goals,
we are determined to find our way on a path to creating greater change.

“Tackling climate change is one of America’s greatest economic opportunitiesof the 21st century.”– BICEP/Ceres Climate Declaration

Collaborating for Change
Climate change affects all of us, and we feel an urgency to act bothalongside others and on our own to bring about the greatest possible
change. Since 2007, for example, we have been actively engaged withCeres, a leading nonprofit organization dedicated to mobilizing thebusiness community to build a sustainable economy.
We are a member of Ceres’ Business for Innovative Climate and Energy Policy (BICEP)
coalition, a group of more than 20 public and private companies – including Nike, Levi
Strauss, Starbucks and eBay – seeking to help pass meaningful energy and climate change
legislation. To underscore the urgency of finding solutions to climate issues, we signed the
BICEP/Ceres Climate Declaration in 2014. Along with more than a thousand companies
and individuals across the U.S., we lent our voice to the message that, “Tackling climatechange is one of America’s greatest economic opportunities of the 21st century.”
We began working to reduce our own carbon footprint in 2003, with an initial goal todecrease our greenhouse gas (GHG) emissions by 11 percent per square foot between

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2003 and 2008 in our U.S. operations. After exceeding that goal, with a 20 percent
reduction per square foot, we committed to reduce our absolute GHG emissions in our
U.S. operations by 20 percent by 2015. We are pleased that we exceeded this goal aheadof schedule, achieving a 33 percent reduction by 2014.

We exceeded our goal to reduce our absolute GHG emissions in our U.S.
operations by 20 percent by 2015, achieving a 33 percent reduction by 2014.
We have seen how working across Gap Inc. is a critical component to making progress.
Our Sustainable Building and Operations Working Group plays a key part in developing
and executing our reduction plan by bringing together leaders from approximately
20 cross-functional departments at Gap Inc., including our brands, construction, realestate, operations, and supply chain. In addition, our Environmental Council, sponsoredby a member of Gap Inc.’s senior leadership, reviews our progress and considers new
initiatives. These groups will continue to play an important role as we work to achieve
our most ambitious goal yet – reducing the absolute GHG emissions in our owned andoperated facilities globally by 50 percent by the end of 2020.

Results
The chart below shows the continuous improvement in absolute GHG emissions in the
U.S. and first year of global data for 2014 for our owned and operated facilities.

Greenhouse Gas Emissions (GHG) for Owned & Operated Facilities
U.S.

Global

2011

2012

2013

2014

2014

Total emissions (Scope 1 & 2)

486,874444,045422,272

407,454499,859

Reduction rate vs. 2008

-20.8%-27.8%-31.3%-33.6%

N/A

Scope 1 GHG emissions

23,867

18,47425,024

26,29331,275

Headquarters

1,842

1,589

1,855

1,739

1,780

Distribution centers

4,791

4,728

5,362

5,328

6,118

Stores17,235

12,157

17,807

19,22623,378463,006

425,571397,248

381,161

468,584

Headquarters

15,614

13,21418,85018,308

23,116

Distribution centers

52,59848,84345,31939,20841,178Stores394,795

363,515333,080323,646404,290

Scope 2 GHG emissions

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100Hunting for Energy Savings
Over time, we have set increasingly ambitious goals to reduce our carbon
emissions. Tackling climate change means shifting habits and ways ofthinking that have become engrained. Sometimes an action will feel
obvious in retrospect; other times, it means breaking into new territory.
One of our recent initiatives reflected both of these ideas. To find what we might not
be seeing, we formed cross-functional teams of service providers, engineers andenvironmental impact experts to conduct “treasure hunts” at some of our stores anddistribution centers (DCs). Their mandate: to look with fresh eyes at our operations anduncover new opportunities for improvements.

We formed teams of service providers, engineers andenvironmental impact experts to conduct energy“treasure hunts” at our stores and distribution centers.
We found many of them, a reminder that even the familiar can yield new ideas. Over the
past two years, our “hunts” have led us to install LED lighting and smart thermostats,which allow us to adjust the temperature based on varying needs at different times of day.
At our DC in Fresno, California, we found 90 improvement opportunities, which reduced
energy use by 17 percent and operating costs by 30 percent. As we expected, someof the changes now seem easy, such as shutting off unneeded lights in the evening.
Altogether, we conducted environmental treasure hunts at eight U.S. store locations andthree DCs, and we rolled out changes based on priority and return on investment.

Improving Lighting and Shipping
Our stores could not function without lights – and the electricity used
to power this lighting accounts for a significant amount of our energy
consumption and GHG emissions. Reducing this energy usage brings
multiple benefits, helping us decrease both our emissions and costs.
We have installed LED lights, which use 80 percent less energy than conventional lights,
at more than 30 percent of our U.S. stores. These lights also last 5-10 times longer, aremuch brighter than the lights they replace, and pay for themselves in just two to three

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101years. Our teams in Japan and the U.K. have converted all of their stores to LED lighting,and our stores in China have been using energy-efficient lighting from the start.
Like lighting, shipping is something we rely on every day to run our business, presenting
both a challenge and an opportunity. In 2011, we joined a voluntary government andindustry collaboration – known as the SmartWay Shipper Program – that brings together
carriers, freight shippers and logistics companies to improve fuel efficiency. In addition to
being a certified U.S. Environmental Protection Agency (EPA) SmartWay shipping partner,
we became a Canadian SmartWay partner in 2013.
Each year, we have committed to increasing the amount of freight we ship by SmartWay
carriers by 5 percent. We also have committed to using cleaner modes of transportationand encouraging the use of fuel-saving strategies and technologies. Recognition of ourefforts has told us that we are on the right track, as we have been named a SmartWay
Excellence semi-finalist for three years, from 2012-2014.

We installed LED lights,
which use 80 percent
less energy and last
5–10 times longer, atmore than 30 percent
of our U.S. stores.
Moving forward, we are working to integrate more of our business operations into the
SmartWay program and improve our data collection to better measure results. We are also
beginning to address our logistics and distribution activities globally as our international
business continues to expand. To work toward our new 2020 emissions reduction goal,
we are using the EPA EnergyStar platform to analyze differences in store performanceand prioritize regions, brands and initiatives with the greatest opportunities for energy
improvements. And we continue to test new ideas. For example, this year we have been
piloting a new energy efficiency program at 100 stores across North America that aims toprovide real-time monitoring and management of our energy use.

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Results
We continued to reduce the energy used to power our owned and operated facilities
in the U.S. and developed a baseline for global energy consumption at our owned andoperated facilities in 2014.

Energy Consumption for Owned & Operated Facilities
U.S.

Total energy consumption

Global

2011

2012

2013

2014

2014

1,014

966

952

928

1,168

-4.7%

-1.4%

-2.5%

N/A

Change vs. prior year
Headquarters

53

50

62

58

67

Distribution centers

126

126

123

113

121

Stores

835

790

767

757

980

* Units = millions of Kilowatt hours (KWh)

Diverting Waste
We know that we will have to make significant improvements to meet our
new waste goal to divert 80 percent of waste from landfill for our U.S.
facilities by the end of 2020.
In 2014, by comparison, we diverted only 29 percent of our waste from our U.S. stores.
This is the first time we have set a goal on such a broad scale, and we are still exploring
potential solutions. Our efforts focus on the boxes, hangers and plastic wrapping used
to transport and protect our clothes as they move from distribution centers to stores.
Reusing or recycling this packaging poses numerous challenges – for example, the natureof our lease arrangements with landlords and real estate developers often limits our
influence over how waste is managed in our stores.
To address these challenges, we partnered with a third-party waste specialist to assess
the waste generated in our U.S. stores in 2014. We are also looking into a range ofpossible solutions, from partnering with our landlords and other retail tenants in malls tocreating mail-in or reverse logistics solutions to consolidate recyclable material in a central
location. We may also pursue solutions that reduce packaging weight or change thematerials in packaging to decrease overall waste volume or allow for greater recycling.
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Creating Solutions for Women + Water
Few resources are as essential to people’s health and well-being as water.
The need for clean, safe water is not just an environmental issue, but ahuman rights issue.
And we want to help ensure that everyone touched by our business can have this needmet. Not only do we rely on water to create our products, but the people who make ourclothes must be able to care for themselves and their families – if they can’t thrive in thecommunities where they live, neither can we. In addition, the processes behind making
a piece of clothing – from dyeing fabric to laundering a pair of jeans – can affect not justthe environment but people, and we feel a responsibility to work to reduce the negativeenvironmental impacts.
For these reasons, water is one of our two primary environmental focus areas. And since
we look at this issue through the lens of how it affects people, we have designed ourstrategy under the umbrella Women + Water. We know that 80 percent of the people who
make our clothes are women – and just as important, women carry much of the burden

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of the world’s water challenges. In many regions, their daily activities revolve around water,as they bear responsibility for collecting it for the household and completing chores suchas washing, cooking and cleaning. Each day, women and girls together spend more than
150 million hours collecting water – time that could be spent earning additional income,caring for their families, or getting an education5.

“Something as simple as access to water affects women differently than men.
Improved access to water can literally transform the lives of women and girls
in developing countries. It can give them back the time and opportunities theysacrifice daily to trek long distances to collect water. It can improve the healthof a woman and her family.”– Dr. Helene Gayle, CEO, McKinsey Social Initiative (former President & CEO, CARE USA)We are focused on helping to ensure that women in communities where our products are
made have access to safe water, and we are also addressing the water impacts createdfrom the making of our clothes. Our priorities center on those areas where we have thegreatest influence and ability to create improvements. Namely, they include partnering withfabric mills to improve their practices, building water filtration plants to provide people withaccess to clean water, and educating the women who make our clothes on safe water
The Short Story

handling practices.

Women + Water

Mapping water risks and opportunities• About 80 percent of the people who

One of the most important steps in building our strategy was conducting an assessment

make our clothes are women, andof both the risks and opportunities related to water that stem from the making of ourwomen are burdened by significant

clothes. In 2013, we partnered with Conservation International to assess freshwater

water challenges.

• Our Mill Sustainability Program
establishes environmental standards
for fabric mills.

risk for five of our key sourcing countries – Bangladesh, Cambodia, China, India andIndonesia. In 2014, we did further research into risks in China, India and Vietnam. Our goal
was to identify the issues that have the greatest impact not just on our business, but on
the people who make our clothes and their communities.

• We are working toward zero
discharge of hazardous chemicals
in our supply chain by 2020.

• We have strengthened our Water
Quality Program, which fights pollution
created by denim laundries.

• Our P.A.C.E. program now includes a

The study covered everything from water availability and quality to the risk of flooding anddroughts. It also looked at cultural and social dimensions of water, such as improving
gender equity, health, sanitation and safety. As we mapped these risks and opportunities,
we found that fabric mills – which use a great deal of water to dye fabric – may haveissues with both water quality and quantity. Even more important, these issues affectwater, sanitation and hygiene (WASH)

workers and their communities. In India, for example, some of our preferred mills and thecurriculum.

people who work there face high levels of water stress.

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In response, we are focusing on fabric mills located in such higher risk areas, starting with
India. And we are linking our water efforts to our P.A.C.E. program, which helps women
gain the skills to advance both at work and at home. We have added water, sanitation andhygiene (WASH) curriculum to P.A.C.E. to increase women’s awareness around safe water
handling practices. Through our P.A.C.E. partner, Swasti Health Resource Centre, we arealso helping to build water filtration plants in rural communities in India, which to date haveprovided clean, safe water to more than 17,000 people.

Eighty percent of the people
who make our clothes
are women – and just as
important, women carrymuch of the burden of theworld’s water challenges.
Creating a mill sustainability program
As beautiful as a piece of fabric may appear as part of a shirt or other piece of clothing, its
production comes with a considerable environmental footprint. In fact, some of the mostsignificant impacts of making our clothes come from fabric mills, which use a great deal ofwater, chemicals and energy during the dyeing and finishing process. Mills demonstrate
how environmental practices carry a direct link to people’s health and wellbeing.
Wastewater must be treated before being returned to the surrounding environment toprotect ecosystems and nearby communities.
WATER

17,000PEOPLE

Through our Women + Water
program, 17,000 people in India
now have access to clean water.
We partner with fabric mills and the
Natural Resources Defense Council
to conserve water and fight pollution.

We have been laying a foundation for our current work since 2004, when we launcheda program to ensure that denim laundries do not harm local water supplies. In 2009 we
went further, joining the Natural Resources Defense Council’s (NRDC’s) Responsible
Sourcing Initiative, Clean by Design, which brought together a range of brands to better
address the water impacts of fabric mills.
Our Mill Sustainability Program, launched in 2013, is focused on establishing clear
environmental standards for fabric mills and integrating them into our sourcing decisions. Our
program also aims to make broader improvements in the industry by identifying and sharing
good practices for improving the use of water, chemicals and energy, as well as incentivizing

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gapinc.com/sustainability106improved environmental performance. Ultimately, our goal is not just to improve environmental
practices at fabric mills – but to ensure that these changes bring real benefits to people’s
lives. Learn more in the section on Reducing Our Impacts at Fabric Mills on page 110.

Eliminating hazardous chemicals
In addition to working directly with mills, we are also addressing the use of chemicals in
the production of our clothes. This use is significant – by leading estimates, on a global
basis the apparel industry accounts for 25 percent of manufactured chemical usage6.
These chemicals are used in wet processing of fabric and clothing such as dyeing andwashing, thereby posing a risk of water contamination that could affect people living in
nearby communities.

Each day, women andgirls spend more than 150
million hours collecting water– time that could be spentearning additional income,caring for their families, or
getting an education.
Our focus is to keep hazardous chemicals out of the processing of our clothes as muchas possible. We believe we can best protect people and communities not by contending
with the use of hazardous chemicals, but by avoiding their use altogether. We haveset an ambitious goal to work towards zero discharge of hazardous chemicals (ZDHC)in our supply chain by 2020, through our partnership in the ZDHC 2020 program, an
industry collaboration. In 2014, the group achieved a major milestone with the creationof an industry-wide standard for restricted substances, which bans the use of harmful
chemicals, particularly in fabric production. We have communicated this restricted
substances list to the vendors, factories and mills that make our clothing and are in theprocess of outlining its enforcement.

Strengthening our water quality program
Our company started off selling jeans, and they remain one of our most important
products, so we feel a strong responsibility to ensure that making them does not bringenvironmental harm to people or communities. We recently took important steps toGap Inc. | Global Sustainability Report | Environment

gapinc.com/sustainability107strengthen our Water Quality Program, which monitors the wastewater created by denim
laundries. From the start, we required all laundries producing for Gap Inc. brands toadhere to a set of industry-leading guidelines on water quality. In 2010, these guidelines
became a requirement for doing business with our brands, and in 2013, we took steps togo even further.

We require all denim laundries producing for Gap Inc.
brands to adhere to a set of industry-leading guidelines onwater quality.
Specifically, we adopted more robust enforcement mechanisms for underperforming
facilities, including having a third party verify their compliance. In 2014, our team provided
training on these changes to all the laundries processing our denim in Bangladesh, wherea large percentage of laundries are based. By March 2015, we had made significant
progress, with all the laundries that process our clothes in compliance with our updated
requirements. We will continue to work on this issue as we move forward – for example,
by piloting a denim laundry energy and water conservation program.

Educating women about healthy water practices
All of our work is guided by the awareness that ultimately, it is people who are affectedby the burden of the world’s water issues. While we believe that our work must start withaddressing the impacts of making our clothes, we also see a great opportunity to work
directly with women and communities who are facing these issues.

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We believe that our new P.A.C.E. curriculum focused on safe water handling practices
offers critical support to women who are helping their families and communities cope withwater challenges. We recently announced a major expansion of P.A.C.E., committing to
educate one million women throughout the world by the end of 2020. This expansion
means that we can reach many more women with effective strategies for managing someof the critical issues that they face around water every day.
In addition, the water filtration plants we are supporting through our partnership with
Swasti are providing clean water to thousands of people. Three systems currently inoperation already serve more than 5,000 households and 29 schools across 30 villages inIndia. The people who use these plants report that they have feel better physically – withfewer ailments like headaches, joint pain and diarrhea – and they also save time because
the plants are a short distance from their homes.

We believe we canbest protect people andcommunities not bycontending with the useof hazardous chemicals,
but by avoiding theiruse altogether.
As a global company, we recognize that making our clothes links us to people throughout
the world and that it is up to us to touch their lives in a positive way. When a piece of fabricis dyed or a pair of jeans is laundered, we are committed to working to ensure that theenvironment – and people – are protected. We still have more work ahead – for example,
while we ultimately aim to focus more on product sustainability and design, this is anarea that we are in the early stages of exploring. At the same time, we see a clear path tocreating greater improvements. To us, the heart of our strategy lies in seeing the connections
between environmental issues and human rights issues – and consistently asking how theenvironmental improvements we make will bring real benefits to people’s lives.

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109

The Short Story

Fabric Mills• Launched in 2013, our Mill Sustainability
Program expands our environmental
efforts well beyond our own operations.

Reducing Impacts at Fabric Mills
Some of the most important environmental impacts related to making ourclothes come from fabric mills, which use a great deal of water, chemicals
and energy during the dyeing and finishing process.

• One key focus has been conducting
environmental assessments at

Mills demonstrate how environmental practices carry a direct link to people’s healthstrategic mills, which expanded to

and well-being. Wastewater must be treated before being returned to the surrounding

40 mills in 2015.

environment to ensure that both ecosystems and nearby communities are protected.

• We have helped mills in China
participate in the Natural Resources
Defense Council’s Clean by Design
program.

• This program has reduced water andWe launched our Mill Sustainability Program in 2013, and while it is focused on improving
mills’ environmental practices, our ultimate goal is to ensure that these changes bring
benefits to the people who live in communities where fabric is produced. Our program

electricity use as well as wastewater

focuses on establishing clear environmental standards for fabric mills and integrating themdischarge.

into our sourcing decisions. It also aims to make broader improvements in the industry byidentifying and sharing good practices for improving the use of water, chemicals and energy.

As beautiful as a pieceof fabric may appear aspart of a shirt or otherpiece of clothing, it cancome with a considerable
environmental footprint.
We started by working with 20 strategic mills in China, India, Pakistan and Taiwan to
conduct environmental assessments, covering such issues as their energy use, water
consumption, wastewater treatment and disposal, and handling of waste and hazardous
substances. Using the Higg Index, a shared standard developed by members of the
Sustainable Apparel Coalition (SAC), we first asked mills to assess their own performance,then had the results verified by an independent third-party evaluator. In addition, we helped
three mills in China participate in the NRDC’s Clean by Design program, and they achieved
significant reductions in water and electricity use, as well as wastewater discharge.

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110After analyzing environmental performance at the first 20 strategic mills, we havedeveloped a roadmap that leads to clean water and responsible practices in textile mills
and laundries. Some of our key actions to date have included:•

We expanded our Mill Sustainability Program in 2015, starting with a pilot to provide
training on resource efficiency to three mills in water-stressed regions of northern India.

•

We included 20 more strategic mills in our efforts to assess environmental
performance, and are again participating in the Clean by Design program with a focus
on mills in Suzhou, China.

We have developed a roadmap that leads to clean waterand responsible practices in textile mills and laundries.
In partnership with our sourcing teams, we are also developing a mill performancestandard that establishes clear expectations on compliance and risk management,
integrating sustainability information into sourcing decisions. We are increasing the scopeof our technical training program to help more mills improve their practices.
The next step on our journey is to collaborate with our brands’ design and production
teams to identify new opportunities for building on our Mill Sustainability Program. The
more we understand the impacts of textile production and the choices we have in
The Short Story

Supply Chain• To more fully address our environmental
footprint, we partner with our suppliers
to improve their environmental
performance.

• We are a founding member of the
Sustainable Apparel Coalition (SAC),
an industry collaboration focused on
creating shared standards.

• We were the first retailer to execute

selecting fabrics, the more we can work toward creating a more sustainable apparelindustry that is safe for people and communities.

Addressing the Impacts of Our Supply Chain
We have focused most of our efforts to mitigate our environmental
footprint on the parts of our business over which we have the mostdirect control. But we know that ultimately we can create greater impact
by moving further into our supply chain, where a significant portion of theemissions related to our business originate.

a large-scale rollout of the Higg
Index, the SAC’s environmental

We are developing a strategy to address these emissions, with a critical first step being tomeasurement tool, with suppliers.

work with our global strategic suppliers to assess their environment impacts. We are also

• To support broader change, we havecollaborating with the broader apparel industry to come up with wide-scale solutions.

collaborated with suppliers in India toshare best water management
practices.

In 2011, we were a founding member of the SAC, which brings together retailers, clothing
manufacturers, environmental groups and academics to develop a shared vision of

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111sustainability. A primary goal of the SAC has been to create an industry-wide index toassess the social and environmental impacts of apparel and footwear. We have taken aleadership role in turning the SAC’s vision into reality. In 2013, a full 80 percent of supplierdata in its system came from Gap Inc. suppliers. And in 2014, we became the firstretailer to execute a large-scale rollout of the Higg Index, the SAC’s measurement tool,with 45 percent of the suppliers that make our products reporting on their environmental
performance.

In 2014, we became the firstretailer to execute a large-scalerollout of the Higg Index, theSustainable Apparel Coalition’s
measurement tool, with 45
percent of the suppliers that makeour products reporting on theirenvironmental performance.
In addition to our work with the SAC, we began working with a targeted group of sevensuppliers (representing approximately 50 facilities) in India to benchmark their water use in
2014. The results quickly highlighted facilities with the best water management practices,and we anonymously shared these insights with other facilities. We also created an
online data dashboard that all of our suppliers can access to see how their environmental
performance compares to competitors and peers. The dashboard breaks down their
GHG emissions, energy use and water consumption by country and factory, identifying
opportunities for improvements.
We aim to ensure that all of the suppliers and factories that make our branded clothing
regularly assess and continuously improve their environmental performance. Our longterm strategy centers on training suppliers on more sustainable manufacturing practices,
engaging them on the Higg Index and our goals, and working with them to establish
environmental impact reduction goals.

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Footnotes1

http://www.worldbank.org/en/news/feature/2014/09/22/ifc-launches-she-workspartnership-to-advance-women-in-private-sector.

2

Christopher J. Ruhm, The Extent and Consequences of High School Employment,
Journal of Labor Research, Vol. 16, No. 3, 1995

3

Policy Brief: “The Business Impacts of Female Empowerment Soft-Skills Training”
by Achyuta Adhvaryu, Namrata Kala and Anant Nyshadham4

http://www.ipcc.ch/pdf/assessment-report/ar5/syr/AR5_SYR_FINAL_SPM.pdf

5Conservation International research for Gap Inc.

6

http://www.csrwire.com/blog/posts/1167-creating-sustainable-apparel-value-chainsfostering-total-resource-productivity-and-impact-investing

Appendix
About this Report
This report covers Gap Inc.’s two fiscal years ending January 31, 2014 (fiscal 2013) andJanuary 31, 2015 (fiscal 2014). We currently publish a new report every two years andupdate data annually. This report has been reviewed by our Public Reporting Working
Group, which has provided an independent statement on our reporting and programs. This
group is comprised of experts on social and environmental issues from leading organizations
that have been collaborating with us for more than ten years in our work to achieve greatertransparency and sustainability.
We sought to prepare the report in accordance with the core option of the Global Reporting
Initiative’s (GRI) G4 Guidelines. We have not conducted external assurance for this report.
Please direct any questions to press@gap.com.

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Public Reporting Working Group Statement
Amid the many reports companies publish, some stand out among the others for various
reasons: the depth of the information, experience over time and willingness to discuss
topics for which quick and/or easy answers are often not possible. Gap Inc., in its
2013-2014 report, stands out for several of those reasons.
Governance and vision in the company is strong. Starting with the letter from Art Peck,
Gap Inc.’s CEO, citing some of the global and local realities in which Gap Inc. works, tothe kind of change the P.A.C.E. program works to bring about in the lives of workers in
different countries, Gap Inc. clearly places itself within the global reality and asks itself:what more can they do to bring about positive change for workers, their families andcommunities as well as the places where they work. As members of the Public Reporting
Working Group (PRWG), we share the sense of urgency and the need to accelerate theprogress to address pressing global challenges. These challenges include the 836 million
people globally who live in extreme poverty, while one in five people in developing regions
lives on less than $1.25 a day. This is a challenge, not just for Gap Inc., but for the entire
apparel industry as it addresses the social and environmental challenges that exist.
Enriched by its continued involvement with numerous stakeholders in different aspectsof its work, Gap Inc. reports on its efforts to improve various components of its supply
chain, including but not limited to: product improvement, sourcing commitment to specificfactories, investigating when there are reported problems and, instead of cutting andleaving as many others do, staying to address the problems found. Gap Inc.’s work toaddress the Sumangali scheme in India is an example of a case where the company knew
there was a problem, and even though they were not involved or responsible for it, stayed
to work to address it.
Gap Inc.’s report demonstrates its long-running commitment to continuous improvement
and their goal of using their position, whether within the industry or within a factory,
to drive positive change. Bringing about change is not easy, especially if/when any
company tries to do it alone. Collecting data points is not sufficient if these data points
do not connect with the larger work to improve the lives of the workers, their families andcommunities, as well as the environment in which they live and work. Gap Inc.’s more
holistic approach sets it apart from the run of the mill as it focuses on improving the livesof workers, both at work and at home.
Over the years, it has become obvious, that when done well, reporting serves several
purposes. First, it is an assessment of what has been done, the benefits of those programs
and processes as well as areas where improvement can take place. Second, reporting
serves as a foundation point for planning and proceeding forward, with that planning based

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on the learnings from the past programs, policies and practices throughout any company.
For example, the integration of sourcing with social compliance should lead to morecomprehensive means of preventing various issues commonly found in supply chains. The
establishment of shared goals between the sustainability and sourcing teams at Gap Inc.
is an important way to align the business and drive better performance. Third, reporting
provides community-based groups, other civil society organizations, investors andconsumers with the information that helps identify the companies that are making progressin improving factory conditions and the lives of workers.
The Gap Inc. report communicates with stakeholders about material issues andeconomic, social and environmental impacts. The proper use of data can drive progresswithin a company while reducing negative impacts and risks. This makes the company
stronger and more viable for the future. At the same time, reporting, sharing one’s
successes and challenges helps drive progress by other companies throughout theworld. In Gap Inc.’s report it is clear that they are willing to run the risk of trying newthings, learning from both the successes and the things that did not work, and working to
improve along the way.
The Public Reporting Working Group has existed since the company decided to publish
its first report in 2003. At that time, Gap Inc. was one of the first apparel companies willingto talk about problems found and what they were trying to do to address them. We knowthat the stature of the PRWG members provided that safe space at a time when reporting
was a risk. In the intervening years, as members of the PRWG, we have watched theopenness of the company to stakeholder input expand, allowing for constructive criticism,
celebration of positive results, and companionship in finding better ways to address ongoing problems. Our long-term relationship with Gap Inc. has provided the possibility forbuilding that trust, thereby making it possible to run the risk of trying things that might bedaunting for others.
While we celebrate the progress that Gap Inc. continues to make, we want to call out thefollowing as places where further work is needed.
1.

We believe it would be beneficial for Gap Inc. to do annual reporting rather thanreporting biannually. Investors increasingly use sustainability data points to evaluate acompany just as they use annual financial reporting to understand a company’s
strengths. The ways companies handle social and environmental challenges are
increasingly understood by investors to relate directly to corporate financial
performance. Yet, too many investors still undervalue these efforts and do not see theconnection. As the company seeks to use its position and profile to help drivechange, it should consider the importance of the investment community. How can

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115the company communicate its CSR activities in ways that help investors appreciate
the connection to corporate value creation, both for Gap Inc., and also for theindustry as a whole?
2.

We are concerned about the company’s decision to report on issues found within
the workplace by geographic region rather than by country. Country-specific data
would make it easier to use the data within the context of local communities andcultural differences between countries. Country-specific data would also be more
useful to local worker rights organizations in their work to highlight country-specificchallenges and address them in their own communities.

3.

It would be extremely helpful to add a section on labor recruitment in order forreaders to understand the labor recruitment processes used by factories where
Gap Inc. sources products. In view of the on-going challenges in labor recruiting
documented in so many reports, it is important that Gap Inc. report on what it isdoing in this area, which could be useful in moving other companies to be moredeeply involved.

Even as we raise these concerns, we want to salute Gap Inc.’s effort to ensure equalpay for men and women around the world. Joining the United Nations’ Women’s
Empowerment Principles and the expansion of the P.A.C.E. program reflect a broad
commitment to women throughout the global footprint of the company. Gap Inc.’sannounced expansion and long-term funding commitment to the program sets a standard
for other companies to follow.
The company’s strong commitment to reduce absolute greenhouse gas emissions 50
percent by 2020 is the kind of science-based leadership we need from the business
community if we are to address the urgent challenge of climate change. The work
to reduce waste (especially hazardous waste) associated with the production of thecompany’s products and to mitigate water pollution are also important environmental
issues. We credit the company for clearly linking this work to the people who work and live
within the company’s footprint. We encourage the company to move forward as noted in
the report with its early stage focus on reducing environmental impacts throughout the fullproduct life-cycle, with implications for the design, use and care of the apparel productsthat Gap Inc. sells.
Mr. Stu Dalheim, Vice President, Governance and Advocacy, Calvert Investments
Mr. Adam Kanzer, Managing Director, Domini Social Investments LLC
Dr. Ruth Rosenbaum, Executive Director, Center for Reflection, Education and Action
Rev. David Schilling, Senior Program Director, Interfaith Center on Corporate Responsibility

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