R6_GAP_SR_COVER 5/10/04 4:26 PM Page 1

SOCIAL RESPONSIBILITY REPORTGAP INC. SOCIAL RESPONSIBILITY REPORT

GapBanana Republic
Old Navy

Two Folsom Street
San Francisco, CA 94105
gapinc.com

R6_GAP_SR_COVER 5/10/04 4:26 PM Page 2

GAP INC. GARMENT SOURCING BY REGION
AS OF 12/31/03
UNITED STATES & CANADAEUROPE (INCLUDING RUSSIA)

GREATER CHINAPERSIAN GULFNORTH ASIA

BELGIUM BULGARIAGERMANY MOLDOVAITALY ROMANIAPORTUGAL RUSSIASPAIN TURKEY
UNITED KINGDOM TURKMENISTAN“ This report contains a great deal of informationthat many companies have not provided publicly,
and includes valuable insights from a company
that we believe is sincerely struggling with thesecomplex issues.”

CANADA

CHINA

UNITED STATESHONG KONG
MACAU
SAIPAN/N. MARIANAS (US)BRAZILCOSTA RICA

COLOMBIADOMINICAN REPUBLICPERU

EL SALVADORTAIWAN (R.O.C.)

EGYPT
ISRAEL

BAHRAIN

JORDANOMAN

MOROCCOQATARTUNISIA

GUATEMALA

Public Reporting Working Group:

UNITED ARAB
EMIRATESHONDURAS

Adam Kanzer, Esq., Domini Social Investments LLC

MEXICOAlya Z. Kayal, Esq., Calvert Group Ltd.

NICARAGUAJAPAN
SOUTH KOREABANGLADESH
INDIA
NEPAL
PAKISTANSRI LANKA

Conrad MacKerron, As You Sow Foundation

BRUNEICAMBODIAINDONESIA

Ruth Rosenbaum, TC, Ph.D., CREA: Center for Reflection,
Education and Action, Inc.
David M. Schilling, Interfaith Center on Corporate Responsibility

KENYA

MALAYSIALESOTHO

PHILIPPINESMADAGASCARSINGAPORE

MAURITIUS

THAILAND

SOUTH AFRICA

VIETNAMFor the full text of the Public Reporting Working Group’s
statement regarding this report, please see Page 28.
MEXICO, CENTRAL AMERICA & THE CARIBBEAN

SOUTH AMERICANORTH AFRICA/MIDDLE EAST

SUB-SAHARAN AFRICA

INDIAN SUB-CONTINENT

SOUTHEAST ASIA

PRODUCTION OF THE REPORT
Because of some of the unique reporting challenges in the apparel retail industry, our first social responsibility report
does not follow established general reporting standards, such as the Global Reporting Initiative (GRI). However,
we have tried to cover key issues and areas important to our stakeholders. We will continue to evaluate reporting
standards such as the GRI, and will seek to incorporate relevant standards into future reporting.
For the production of this report, we selected an environmentally responsible printer that has a “zero landfill” policy,
recycles all process material waste and has an enclosed printing facility with negligible fugitive emissions.

Main cover photo: Xiuxia, 26, works in
the inspection department of a Gap Inc.approved garment factory in southern
China. The factory is one of approximately
241 Gap Inc.- approved facilities in China.

This report was printed in the U.S.A. on recycled paper.
Design: O&J Design, Inc.
Photography: Cover, Pages 2, 12, 13, 17, 24, 25 photos © 2004 Luis Ascui; Cover, Pages 2, 10, 11, 12, 17, 20, 21
photos © 2004 Sacha Dean Biyan; Cover, Pages 4, 13, 17, 26, 27 photos © 2004 Katarina Hesse; Pages 2, 6, 9, 38
portrait photos © 2004 Eric Millette; Cover, Pages 4, 12, 17, 22, 23 photos © 2004 Brent Stirton.
Printing: Lithographix, Inc.
© Gap Inc. 2004

Table of Contents

Who We Are

02

Executive Summary

Our Global Compliance Program06

Developing Our Program08

Our Program Today

10

Manufacturer and Factory Approval Process

12

Ongoing Factory Monitoring

14

2003 Code Violations

16

Rating Factories

17

Introduction

18

Stakeholder Feedback

20

Independent Monitoring

22

Freedom of Association

Challenges

Broader Commitments

24

Cambodia

26

China

28

Increasing Transparency

29

Looking Forward

30

Corporate Compliance and Governance

32

Environment

34

Our Employees

36

Community Involvement

Glossary

39

Company Overview

40

Period covered: Unless otherwise noted, all references to 2003 are for the calendar year, not Gap Inc.’s fiscal year, which ended January 31, 2004.

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT

1

WHO WE ARE

Paul Pressler
President and Chief Executive Officer

Executive Summary

When I decided to join Gap Inc. in the fall of 2002, one of thegarment manufacturing industries is immensely difficult. We

first things my teenage daughter asked was, “Doesn’t Gap use

are working to effect change in factories that produce apparelsweatshops?” I was able to tell her how the company wasfor many apparel retailers. And while some of these retailers

working to fight sweatshop practices and improve garment

share our commitment, others may not.

factory conditions around the world.
More collaboration is needed. To foster greater compliance
Her question didn’t surprise me, though. Our company hasn’t

with labor standards in garment factories, we support multi-

done enough to tell people about our efforts. We have an

stakeholder efforts currently under way to develop a universal

opportunity to improve our transparency and bettercode adopted and enforced by all apparel brands and retailers.

communicate with our employees, shareholders and otherWe would endorse a universal code that is at least as stringent

concerned stakeholders. This social responsibility report,

as our current standards, including a commitment to freedom

our company’s first, is a big step toward that goal. For severalof association, and that is consistent with the International

years, we have provided an overview of our ethical sourcing

Labour Organization’s (ILO) core labor

practices on our company’s Web site, gapinc.com. This report,

standards. We believe a strong universal

also available online, discusses our efforts more thoroughly.

code, with consistent enforcement by all

It provides comprehensive monitoring data about factory

apparel brands and retailers, will promoteconditions and greater insights into the complex

more collaboration and result in morechallenges we face, our collaborations

effective use of industry monitoring andwith stakeholders worldwide and thecompliance resources.

longer-term solutions we believe arenecessary to achieve lasting change

Capacity building is another issue

in the garment industry.

important to us. Improving one factory is
challenging enough. Creating sustainable

We believe that garment and otherchange across a country or region often

manufacturing workers around the world

seems impossible. In many countries,

deserve better than the reality that many

governments simply don’t have theunfortunately face. We recognize andresources or the will to enforce laws

embrace our duty to take a leadershipand regulations. Non-governmental

role. While we know firsthand that positive

organizations (NGOs) struggle to develop the skills andchange is possible, we also have learned

find the financial resources necessary to support meaningfulthat creating sustainable and scalable

change on a broader scale. Retailers, manufacturers,

solutions across the retail apparel andgovernments, unions and NGOs must work together more

2

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT

WHO WE ARE

Improving garment factory conditions is a central elementof our overall commitment to social responsibility, which is
why we’ve made this work the primary focus of our firstreport. But our social responsibility commitments don’t stop
there. Community giving and volunteerism also are deeply
embedded in our company’s culture and values, as well as a commitment
to the environment, to strong corporate governance and ethical businesspractices, and to making sure we’re continually developing and supporting
our more than 150,000 employees worldwide.
effectively to create a stronger framework. To that end,

We have a comprehensive internal monitoring program.

we are working with partners worldwide to complement our

Today we have a global network of more than 90 full-timeefforts. As international trade agreements are negotiated, we’re

employees who hold garment manufacturers accountable forsupportive of additional efforts to strengthen compliance withrespecting workers’ rights and providing acceptable conditions.

national laws and international labor standards. We continually

Our compliance team embodies our commitment to sociallywork to encourage greater ownership and responsibility by

responsible and ethical business practices.

garment manufacturers for conditions in their factories.
The goal is not only to improve ongoing compliance with our
We are convinced that collaborative, multi-stakeholder

standards, but also to show factories what success looks likeengagement is the only way to create sustainable change

and how operating in a socially responsible way can improveindustrywide. That’s why we’ve been expanding our global

their business. When problems are found, our team works

partnerships and significantly broadening our work with outsidewith garment manufacturers to fix them. In doing so, we trygroups. For example, we recently joined Social Accountability

to build trust and create an environment that fosters continualInternational’s (SAI) Corporate Involvement Program, the Ethicalimprovement.

Trading Initiative (ETI) and the United Nations’ Global Compact.
We know that if we were to pull out of a factory every time
We’re constantly learning how to work smarter and morea problem was found, management might feel inclined to hideeffectively. We’ve been evolving our program since the early

violations rather than work with us, and issues would never

1990s, when we first developed labor guidelines for garment

be resolved. Workers’ jobs also may be put at risk. However,

manufacturers. In 1996, we developed a more comprehensive

sometimes we have no choice. If garment manufacturers refuse

Code of Vendor Conduct. The code clearly prohibits child labor,

to work with us, we won’t keep working with them. Whenforced labor and discrimination, and protects freedom ofserious or excessive problems are discovered and remain

association and other rights for workers.

uncorrected, we often make the difficult decision to leave.

3WHO WE ARE

Executive Summary

We are convinced that collaborative,
multi-stakeholder engagement is the
only way to create sustainable change
industrywide. That’s why we’ve been
expanding our global partnerships andsignificantly broadening our work withoutside groups.

Improving garment factory
conditions is a central
element of our overallcommitment to social
responsibility, which is
why we’ve made thiswork the primary focus
of our first report. But

In 2003, we revoked the approval of 136 factories. Sometimes,

our social responsibility

garment manufacturers also stop doing business with uscommitments don’t stopbecause they believe our standards are too stringent.

there. Community giving
and volunteerism also are

To complement our internal compliance efforts we have been a

deeply embedded in ourleader in supporting independent monitoring in Central America

company’s culture and values, as well as a commitment toand elsewhere, and sponsoring supervisor and worker training

the environment, to strong corporate governance and ethicalinitiatives such as the Cambodian Labor Training Coalition.

business practices, and to making sure we’re continually

These third-party initiatives are an important part of ourdeveloping and supporting our more than 150,000 employees

program. In this report, four case studies, focusing on Central

worldwide. These efforts also are highlighted in this report.

America, Lesotho, Cambodia and China, illustrate thecomplexities of creating sustainable improvements. Also

Our Board of Directors strives to maintain the highest ethics

included is stakeholder feedback we’ve received on what weand integrity in every aspect of our business. Independent

do well and what we can do better, from groups such as the

directors comprise our Governance, Nominating and Social

Maquila Solidarity

Responsibility Committee, which oversees our corporate

Network (MSN).

governance and social responsibility practices. Independent
directors also represent a majority of our Board.
Giving back to our communities is a vital part of our culture.
In 2003, Gap Inc. employees volunteered nearly 22,000 hours
through company-sponsored programs. We cleaned community
parks and restored creek habitats, helped kids with art projects
and fed the homeless. In December 2003, our employees in the
United States and Canada adopted more than 1,000 families for

4

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT

WHO WE ARE

Giving back to our communities is avital part of our culture. In 2003, Gap Inc.
employees volunteered nearly 22,000
hours through company-sponsoredprograms. We cleaned community parks
and restored creek habitats, helped kids
with art projects and fed the homeless.
the holidays and ensured that they received gifts on their wishin need. Product donations and employee volunteerism

lists. Throughout the year, we support volunteerism by providing

significantly extend our financial support to communities infull-time employees the opportunity to take paid time off forwhich we live, work and do business.

volunteer activities. Through our “Money for Time” program, we
donate $150 for every 15 hours an employee volunteers to a

As we continue to evolve in our social responsibility efforts,

community organization.

we are committed to communicating our progress andchallenges, and soliciting ongoing feedback fromThrough our Gap Foundation, we’ve donated approximately

our employees, shareholders and other concerned$60 million in grants during the past five years, or approximately

stakeholders. We want to hear from you. A

one percent of net earnings before taxes for the period, tofeedback form is included in this report. You alsoorganizations worldwide that arecan email us at social_responsibility@gap.com.

focused on helping children, youth
and families. In the United States,

I am proud of the passion and dedication of ourour Foundation has provided

employees worldwide. Every day, they honor thenational support to Boys & Girlsvalues of this company and exemplify our belief

Clubs of America and to thein doing business in a socially responsible way.

Lorraine Monroe Leadership

We’ve accomplished a lot, as shown in this report,

Institute, which provides training

but there’s always more we can learn and do. How we doto public school principals. We

business is as important to us as what we do—and we’ll

also make substantial productcontinue working hard to ensure that our actions consistently

donations (more than $12 million

support our values. in 2003, for example) toorganizations that help people

5OUR GLOBAL COMPLIANCE PROGRAM

Anne Gust
Executive Vice President,
Chief Administrative and Compliance Officer

Developing Our Program

Conducting our business with integrity is a core value of

Our Code

Gap Inc. As the company’s Chief Administrative and Compliance

Gap Inc.’s Code of Vendor Conduct consists of eight major areas:

Officer, a big part of my job is ensuring that we live up to that

Local labor laws

value every day. My team is responsible for making sure ourEnvironmental

ethics policies are more than just words on paper. Our codes

Discriminationof conduct, whether for garment manufacturers or for our own

Forced labor

employees, reflect how we run our business. Both our CEO andChild labor

Board of Directors hold my group accountable for making sure

Wage and hour requirements

Gap Inc. operates in a socially responsible way.

Working conditions
Freedom of association

Members of my team are responsible for most of the areas

For the complete Code of Vendor Conduct, visit us at gapinc.com.

covered in this report, from environmental policies andcommunity involvement to corporate governance and global

sections are highlighted on this page.

garment manufacturer compliance. We work to make sure
our policies are embedded in all of our business practices.

We believe our program has helped improve conditions in thefactories that make our apparel. Our focus now is to help foster

Although only one aspect of our broader commitment tomore sustainable solutions across the industry. Our challengesocial responsibility, we have focused most of this reportis to determine how best to work with stakeholders, including

on our ongoing efforts to achieve sustainable and measurable

NGOs, unions, governments and other apparel brands andimprovements in garment factory conditions and labor standards.

retailers, to move garment manufacturers toward global andsustainable improvements in labor standards. These efforts will

Since the early 1990s, when Gap Inc. and a few othercreate a stronger framework to more consistently enforce laborcompanies in our industry began to focus on working

standards among all garment factories and help drive greater

conditions in the global garment industry, we have greatly

ownership of labor standards by manufacturers.

evolved our approach to this issue. We started with a strong
foundation—our Code of Vendor Conduct—which is based on

The information on Page 7 shows how our program has evolved

internationally accepted labor standards and is published in 24

and how we rate ourselves today against our objectives.

languages. It lays out our operating requirements for any

Continuous improvement is important to us and to many ofgarment manufacturer that wants our business. No garment

our stakeholders. This report demonstrates our strengths andmanufacturer or factory is in full compliance with allopportunities, and our desire to more fully engage stakeholders

requirements all of the time. But our expectations forwhile addressing challenges and creating global, industrywide

continuous improvement are clear. Our code’s eight key

capabilities to achieve lasting improvements.

6

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTOUR GLOBAL COMPLIANCE PROGRAMEVOLVING OUR PROGRAM & DEVELOPING OBJECTIVESGAP INC. SELF-ASSESSMENT AGAINST OBJECTIVES

Gap Inc. began addressing conditions in third-party garment

Supplier monitoring for compliance with company standards

manufacturers in 1992, with the development of our first set
Supply chain alignment with CSR practicesof labor, health and safety standards for manufacturers. Since
that time, we have steadily evolved our program, as the chart

External engagement with NGOs/stakeholders

below illustrates. Our standards, as detailed in our Code ofTransparency

Vendor Conduct, form the foundation of our efforts and set
Industry collaboration

clear expectations for the garment manufacturers that produce
our merchandise. We enforce those standards through a

Public policy engagement

comprehensive global monitoring program. In the past few

SIGNIFICANTPROGRESS

years, we have begun to broaden our focus beyond monitoring,SOME
PROGRESSOPPORTUNITY

recognizing the need for broader stakeholder engagement andAssessing our own performance against our objectives

capacity building to more fully address issues in the garment(illustrated above), we believe our record demonstrates

industry longer term.

leadership in monitoring garment factory conditions andenforcing established standards. In other key areas, such as

We believe these efforts, coupled with our ongoing monitoring,external stakeholder engagement and public policy engagement,

will help create and support more sustainable solutions. Critical

we believe our efforts show progress against our objectives.

to this goal is continuing to drive greater ownership by garment

At the same time, we believe we have more work to do to

manufacturers of labor, health and safety standards in their own

establish leadership in the areas of supply chain alignment,

factories, rather than having standards imposed by appareltransparency and industry collaboration.

brands and retailers. Capacity building efforts with governments,
NGOs and civil societies worldwide is important in ensuring that

Our efforts are described in detail in this, our first report,

comprehensive frameworks exist to support and enforce

and represent our commitment to greater transparency.

internationally recognized standards.

Additional information can be found at gapinc.com. 

EVOLUTION OF OUR EFFORTS TO IMPROVE GARMENT FACTORY CONDITIONSGLOBAL OWNERSHIPSUSTAINABLE SOLUTIONSCAPACITY BUILDINGSTAKEHOLDER ENGAGEMENTMONITORINGCOMPLIANCE
STANDARDS
'92

'93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

Ongoing

7

OUR GLOBAL COMPLIANCE PROGRAM

Our Program Today

GLOBAL COMPLIANCE EVOLUTION

More than 90 full-time employees work in Global Compliance.
Most are Vendor Compliance Officers (VCOs) who work to

YEAR

MILESTONE

improve labor conditions among the garment manufacturers that

1992

Gap Inc. develops Sourcing Guidelines outlining general labor standards forvendors to follow; Quality Assurance employees oversee this initiative.

produce our apparel and operate approximately 3,000 garment

1995

Labor conflict at Mandarin International factory in El Salvador (see Page 20)
increases company’s awareness of factory conditions and the need to ensure
vendor commitment to Sourcing Guidelines.

1996

In the wake of Mandarin incident, Gap Inc. partners with three outsideorganizations to form the Independent Monitoring Working Group, which
pioneers the industry’s first independent monitoring program in El Salvador.
Gap Inc. forms internal compliance organization, hiring first Vendor Compliance
Officers, and begins to separate compliance from Quality Assurance function.

1999

Most VCOs are from the region or country they oversee.
They represent about 25 nationalities and speak as many
languages. Some have worked in factories as managers oron the production line. Others have experience in educationand government or with NGOs. Still others were local labor

Sourcing Guidelines replaced by comprehensive Code of Vendor Conduct.

organizers or lawyers. We believe this diversity and localized

Gap Inc. is one of many apparel retailers named in Saipan lawsuit (see Page 9),
an experience that highlights the need to refine and better articulaterequirements for foreign contract garment workers.

approach greatly enhances the team’s commitment andTo further strengthen compliance function, Gap Inc. separates compliance fromsourcing, establishing independent Global Compliance department reporting
into company’s Chief Administrative and Compliance Officer.
2000

factories in about 50 countries.

Journalist alleges child labor violations at Cambodian garment factory; Gap Inc.
requires additional age verification in that country (see Page 24).
Gap Inc. becomes second corporate partner of Global Alliance as part ofmultiyear commitment to identify garment worker needs, develop training forworkers and management and provide community-based services.

effectiveness. A profile of one of our VCOs, VannChhai Leng,is included with the Cambodia case study on Page 25. Other
profiles can be found at gapinc.com.
OUR PROGRAM SCOPE
Headed by Dan Henkle, Vice President of Global Compliance, our
Global Compliance department is separate from and independentof our sourcing organization and focuses on improving factory

2001

Gap Inc. implements guidelines to help protect rights of foreign contract
garment workers, including freedom to return to their home country (see Page 9).

working conditions and labor standards.

2002

Gap Inc. supports formation of Public Reporting Working Group (see Page 28).

While factory monitoring is an important part of our program,

Gap Inc. pilots program to rate factory compliance (see Page 16).
Global Partnerships group formed within Global Compliance department tofocus on stakeholder dialogue and engagement.
Gap Inc. supports Cambodian Labor Training Coalition on an initiative toimprove factory conditions and relations between workers and management(see Page 25).
2003

8

Gap Inc. strengthens external engagement by joining SAI’s Corporate
Involvement Program and the United Nations’ Global Compact(in April 2004, Gap Inc. joined ETI).

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT

we know that it isn’t enough to support sustainable change.
Most garment manufacturers work with many customers.
Our influence on a given manufacturer’s practices is limited
when we represent only a fraction of its production. So, in 2002,
we initiated a strategy to collaborate with partners worldwide inan effort to foster longer-term solutions.

EVOLVING OUR GLOBAL COMPLIANCE PROGRAM“There are no easy answers to complex problems.
Monitoring helps, but sustainable change across our industry
will only occur through collaboration with partners worldwide.”
Dan Henkle, Vice President of Global Compliance

Because NGOs often have close relationships with garment

Protecting Foreign Contract Workers

workers, they are able to provide us with insights into factory

In January 1999, a U.S. federal class-action lawsuit was filed against

conditions that our compliance team may not see. By working

18 apparel retailers, including Gap Inc., that purchased merchandise

more closely together, we’ve found that we are often able

made in Saipan, part of the U.S. Commonwealth of the Marianas

to resolve issues before they escalate into a crisis. Such

Islands. Almost every garment manufacturer on the island also waspartnerships also give us the chance to address broader

sued. The lawsuit alleged poor factory conditions and mistreatment

issues, from a variety of perspectives.

of immigrant workers who came from China, the Philippines and othercountries after signing employment contracts for jobs on Saipan.

To date, we’ve engaged with three types of organizations:
We vigorously defended ourselves because we felt strongly that the• Multi-stakeholder groups such as SAI, ETI, and the Global

allegations against us were untrue. The lawsuit treated all retailers

Alliance for Workers and Communities (GA), where we workand manufacturers the same, regardless of specific factory conditions

with other companies and organizations on shared concerns.

and company practices. We had production in only a small number ofthe factories sued, and we monitored those factories on an ongoing• Groups with global reach, such as MSN and Union ofbasis. In September 2002, we entered into a settlement. The agreement

Needletrades, Industrial and Textile Employees (UNITE), which

benefited all parties by establishing Saipan’s first independent factory

provide us with critical information and expertise as exemplified

monitoring program.

in the Lesotho case study on Page 22.
The lawsuit increased our awareness about “foreign contract” workers• Local groups, such as the Cambodian Labor Training Coalition(see Page 25), which address country-specific challenges.

and the unique vulnerabilities they face at the hands of recruitment
agents and factory management. To obtain a job, these workers
typically incur debt that must be repaid before they can return home.

A number of stakeholders have commented on our efforts,
highlighting what we do well and what we can do better (seeIn 2001, we implemented strict guidelines to better protect foreign

Page 18). In particular, the five organizations we’ve partnered

contract workers in the approximately five percent of Gap Inc.-

with to form our Public Reporting Working Group—Domini

approved factories that employ them worldwide. Employment contracts

Social Investments, the Calvert Group, the As You Sow

must be written in the workers’ native languages and workers must be

Foundation, the Center for Reflection, Education and Action

paid at least the local minimum wage. Factory management must allow(CREA), and the Interfaith Center on Corporate Responsibility

workers to control their own travel documents and wages. Most

(ICCR)—have provided their views on this report and ourimportantly, workers must be free to leave the factory and return home

progress toward transparency (see Page 28). at any time and management must agree to assume a proportionate
amount of the returning workers’ debt. 

9OUR GLOBAL COMPLIANCE PROGRAM

Manufacturer and Factory Approval Process

Our initial factory evaluation process is a cornerstone ofconsistently fail to live up to their commitments.

our program. Before any order is placed, we must evaluate andapprove the manufacturer and each garment factory it intends

Our approval process involves three steps:

to use for our production.

1) A manufacturer’s written commitment: A manufacturer
must sign our compliance agreement, stating its commitment

The initial evaluation process applies to all garment

to abide by our Code of Vendor Conduct. The manufacturer ismanufacturers, their factories and subcontractors. Our sourcing

required to provide a profile of each facility it plans to use forteam assesses factories before an approval request is sent toour order and its workers. The manufacturer also must agree

Global Compliance. Approval involves a multi-step qualification

to allow us unrestricted access to factory workers, working

process, outlined below. The process can take from a week toand living facilities and employment records. Manufacturers

more than a year to complete. Approximately 90 percent of thesometimes remove themselves, or we may remove them, fromfactories we evaluate fail the initial inspection. While mostconsideration at this stage because they either cannot, or will

factories correct problems and are eventually approved, we

not, meet our standards.

ultimately reject about 16 percent of all new factories evaluated.
2) Our initial evaluation visit: Once the required paperwork
No garment factory is perfect. But this process helps ensure

has been reviewed, a VCO schedules a visit. A detailed

that we screen out the worst factories and look for those thatassessment of factory conditions is conducted based on thehave the ability to meet our standards, provide decent

eight sections of our code. Any violations are documented.

conditions and treat workers fairly. While we strive to help

Our policy is that no garment factory is approved without anapproved factories make ongoing improvements, some factories

inspection by one of our VCOs.

The Approval Process in Action:
Our approval process cantake from one week to more

7/15/03

7/24/03

REQUEST

DOCUMENTATION

Gap Inc.’s regional sourcing officein Miami requests that ourcompliance team evaluate a newfactory in Guatemala for approval.

Compliance staff sends required
documents to factory.

8/08/03

8/07/03
EVALUATION

than a year to complete.
This timeline shows anactual approval process inthe second half of 2003 fora new factory in Guatemala.
In this example, the process
took just under four months.

10

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT

Factory management submitscompleted documents.

VCO based in
Guatemalaschedules afactory visit.

EVOLVING OUR GLOBAL COMPLIANCE PROGRAM

2003 FACTORY APPROVAL DATANUMBER OF FULL-TIME
GLOBAL COMPLIANCEEMPLOYEESNUMBER OF NEWGARMENT FACILITIESEVALUATEDGreater China

17

North Asia

6Southeast Asia
Indian Sub-Continent
Persian Gulf
North Africa & the Middle East

REGION*APPROVEDNOT APPROVEDPENDING

101

80%

15%

5%

36

94

3

3

18

118

84

8

8

12

101

76

18

6

0

4

100

0

0

2

40

50

25

25

Sub-Saharan Africa

4

40

60

18

22

Europe (including Russia)

5

99

66

26

8

United States & Canada

19**

23

83

4

13

Mexico, Central America & the Caribbean

9

67

81

15

4

South America

1

24

58

21

21

Total

93

653

75%

16%

9%

*For a list of countries in each region, please see the inside back cover of this report. **Includes headquarters staff based in San Francisco.

3) A decision by our compliance team: After analyzing theplaced—or additional corrective action may be required.

paperwork and the results of the evaluation, our Global

Follow-up evaluations may be needed. If a manufacturer does

Compliance staff determines whether the manufacturer is able

not satisfactorily correct the problems, or is unable or unwillingto comply with our code. At this point, the manufacturer andto make necessary changes, it will be rejected. Approved

applicable factories may be approved—meaning orders can be

garment factories are then monitored on an ongoing basis. 

9/17/03

9/19/03

10/07/03

EVALUATIONVCO conducts
initial evaluationof the factory.

11/04/03

10/31/03
DECISION

VCO notifies management ofcorrective actions required to gain
approval, which include installing aventilation system in the spot
cleaning area and providing
workers with appropriate personal
protective equipment for handlingchemicals.

VCO conducts afollow-up visit tocheck status ofrequested changes
and provides further feedback tofactory management.

VCO conducts a
Factory is approved andthird visit and“activated,” making it eligible
confirms that all
to receive Gap Inc. orders.
issues areresolved. Evaluation is submitted to
Global Compliance administration
staff.

11

OUR GLOBAL COMPLIANCE PROGRAM

Ongoing Factory Monitoring

We strive to monitor all approved garment factories at least

2003 FACTORY MONITORING DATA

once in a 12-month period. In 2003, our VCOs conducted
APPROVED FOR
ALL 0F 2003

approximately 8,500 visits to garment factories around theworld. The chart at the right shows the percentage of factories

APPROVED FOR
ALL OR PART OF 2003

NUMBER OFGARMENTFACILITIESPERCENT OF
FACILITIESVISITEDNUMBER OFGARMENTFACILITIESPERCENT OF
FACILITIESVISITED

464

89%

visited in each region, both for those that were on our approved

REGION*

list for all of 2003 and those that were approved for any part ofGreater China

252

100%

the year. The percentages in the second column are lower thanNorth Asia

100

100

200

95

in the first column as some facilities are removed from ourSoutheast Asia

425

99

672

90

approved list during the year before a visit can be conducted.

Indian Sub-Continent

370

96

592

90

Persian Gulf

22

91

42

83

North Africa& the Middle East

41

83

91

66

We monitor garment manufacturers and factories for theircompliance with the eight main sections of our Code ofVendor Conduct. The chart on Pages 14-15 shows the regional

Sub-Saharan Africa

59

95

118

75

distribution and the extent of verified code violations in 2003.

Europe(including Russia)

130

78

277

77

United States& Canada

104

80

188

70

Few factories, if any, are in full compliance all of the time.

Mexico,Central America& the Caribbean

143

94

298

87

68

90

If they were, we wouldn’t need a code or the extensive
resources we devote to monitoring. When we find problems,
we work with management to try to resolve them as quickly
as possible. We will stay with a manufacturer as long as we
believe it is committed to making ongoing improvements.

South America
Total

44
1,690

91
94%**

3,010

86%**

* For a list of countries in each region, please see the inside back cover of this report.
**A number of factors, including staffing and limited transportation to remote regions,prevented some facility visits in 2003.

Any violation concerns us, but we pay
particular attention to violations of coreareas of our code, including serious issues

12such as forced or child labor. We also take

CORE VIOLATIONS

note when violations occur frequently, such

While we consider all areas of our code important, there are

as in the area of health and safety, or if wecore aspects of it that significantly impact working conditions.

see a pattern develop over time. In 2003,

These range from wage and hour issues, such as correct

we terminated our business with 136

payment of wages, voluntary overtime and at least one day

factories for serious or excessive breaches

off in seven, to our prohibition of forced labor, child labor andof our Code of Vendor Conduct.

physical abuse and a worker’s right to freedom of association.

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTEVOLVING OUR GLOBAL COMPLIANCE PROGRAM

We monitor core areas through a visual inspection of the

FREQUENT VIOLATIONS

factory, a thorough review of timecard, production and payroll

Some code violations, such as in the area of health and safety,

records and by talking with workers. When violations are found,

tend to occur frequently. This is, in part, because they are often

our VCOs work with management and sometimes workers to

temporary—an aisle blocked by a moveable cart, for example—

design and implement remediation plans. If we find that wages

and, in part, because they are easier for our monitors to spotor overtime rates have not been paid in full, we typically require

during a factory inspection. Although such violations vary in

the factory to provide workers with back pay.

severity, most are addressed quickly. As we work with
manufacturers over time, we tend to see significant

Violations in some core areas, such as freedom of association

improvement in this area.

and discrimination, can be especially difficult to uncover andprove. When we investigate complaints, we often findViolations of local law also tend to occur often. Sometimes thisourselves grappling with different perspectives and conflicting

is because laws are unclear or contradictory, making complianceviews. Because allegations often involve disputes between

difficult. In other cases, government enforcement is insufficient

workers and management, there are usually two or more sides

or nonexistent. In still others, local regulations may not beto the story. Although our data in these areas for 2003 shows

publicized and manufacturers are unaware that the law even

only a few verified cases, we believe violations were moreexists. To address this, our VCOs work to maintain a list of

widespread than our data suggests. We are currently working

relevant local laws for the areas they monitor. However, given

with our VCOs and external stakeholders to make ourthe complexity of the legal landscape and lack of transparency

monitoring more effective in these areas.

in some countries, this remains an ongoing challenge.

A single serious violation—such as forced or child labor or

HABITUAL VIOLATIONS

knowingly falsifying records—threatens our relationship with a

Our goal is to help manufacturers improve their overall level

manufacturer. In 2003, we verified two instances of underageof compliance over time. As a result, we pay attention not only

workers. In one case, the worker was considered underageto the type and frequency of violations, but also to the patterns

because she was a few weeks shy of her sixteenth birthday,

in which they occur. We become concerned when we see thethe minimum working age in that country. In the other, thesame violation occur over and over again, as it suggests either

worker was not properly registered with local authorities as aa lack of commitment on the part of management or a deeper“young worker.” We terminated business with both factories.

systemic problem. To address these types of issues, we’ve
begun to introduce training programs and other projects
designed to target the root causes of problems. The four casestudies on Pages 20-27 describe some of our efforts. 

13OUR GLOBAL COMPLIANCE PROGRAM

Our Code of Vendor Conduct outlines eight categories oflabor and operating standards. All new garment manufacturers
must be pre-approved before orders are placed. Once approved,
factories are monitored on an ongoing basis. The chart below
illustrates the regional distribution and frequency of code
violations documented by Gap Inc. VCOs in approved factories
in 2003. 

2003 Code Violations

REGION*GREATERCHINA

INDIANNORTH SOUTHEASTSUBASIA
ASIA CONTINENTPERSIANGULFNORTHAFRICA &MIDDLEEAST

SUBEUROPESAHARAN (INCLUDING
AFRICARUSSIA)MEXICO,CENTRALAMERICAU.S. && THE
CANADA CARIBBEAN

SOUTH
AMERICANo. of active factories

464

200

671

592

42

91

118

277

188

298

68

No. of factories revoked for compliance violations

42

1

42

31

6

1

4

9

0

0

0

GENERAL PRINCIPLE

Lacks full compliance with local laws
Restricted access of Gap Inc. representatives
ENVIRONMENT

Lack of environmental management system or plan
Insufficient notification procedures in case ofenvironmental emergency
DISCRIMINATION**

Employment
Wages & benefits
FORCED LABORUse of any kind of involuntary labor, including prison
labor, debt bondage or forced labor
For foreign contract workers, non-payment ofagency recruitment fees and/or requiring workers
to remain in employment against their will
CHILD LABOR

Workers are not 14 years old or do not meet
minimum legal age requirement
Not in full compliance with child labor laws
Failure to allow eligible workers to attend nightclasses and/or participate in educational programs
Poor age documentation
WAGES & HOURS

Pay is below minimum wage
Overtime pay rates are below legal minimum
Work week in excess of 60 hours
Workers cannot refuse overtime without threat ofpenalty or punishment
Workers do not have at least 1 day off in 7
Violation of local laws on annual leave and/or
holidays
Unclear wage statements*For a list of countries in each region, please see the inside back cover of this report.

14

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTOUR GLOBAL COMPLIANCE PROGRAMLEGEND
No code violations verified
Violations verified in less than 1% of factories
Violations verified in between 1% and less than 10% of factories
Violations verified in between 10% and less than 25% of factories
Violations verified in between 25% and less than 50% of factories
Violations verified in more than 50% of factories

REGION*GREATERCHINA

INDIANNORTH SOUTHEASTSUBASIA
ASIA CONTINENTPERSIANGULFNORTHAFRICA &MIDDLEEAST

SUBEUROPESAHARAN (INCLUDING
AFRICARUSSIA)MEXICO,CENTRALAMERICAU.S. && THE
CANADA CARIBBEAN

SOUTH
AMERICA

WORKING CONDITIONS

Physical punishment or coercion
Psychological coercion and/or verbal abuse
Violation of local laws on working conditions
Insufficient lighting
Poor ventilation
Insufficient or poorly marked exits
Obstructed aisles, exits or stairwells
Locked or inaccessible doors and exits
Insufficient number of and/or inadequately
maintained fire extinguishers
Insufficient number of fire alarms and/or
emergency lights
Not enough evacuation drills
Machinery lacks some operational safety devices
Inadequate personal protective equipment
Insufficient access to potable water
Inadequate first-aid kits
Unsanitary toilets and/or restricted access
Inadequate storage of hazardous and combustible
materials
FREEDOM OF ASSOCIATION***

Workers are not free to choose whether or not tolawfully organize and join associations
Penalization or interference with workers’ lawful
efforts to organize
General Principle—Lack of knowledge about, and compliance with, local laws is a common issue worldwide (see Page 13).
Environment—Common violations included inadequate environmental plans and documentation.
**Discrimination—We believe violations in this area are more widespread than this data suggests. Examples of verified violations included a stated preference for female workers, wrongfultermination of pregnant employees, pregnancy testing, inadequate hiring policies and procedures, and higher wages paid to local workers versus foreign workers.
Forced Labor—We verified one technical violation involving a contractual provision that required workers to remain employed at the factory for a minimum period following overseas skills
training. This category includes an additional sub-set of provisions (not shown) specific to foreign contract workers (see Page 9).
Child Labor—We require manufacturers to ensure that workers are at least 14, the minimum age under our code, or the minimum working age allowed in the country, whichever is higher. In
the two verified cases of child labor violations in 2003, both workers were older than 14, but one was younger than the country's legal minimum age and one was not properly registeredas a “young worker.” We terminated business with both factories.
Wages & Hours—Inaccurate recordkeeping, incorrect or non-payment of wages and excessive overtime hours are common violations. We regularly review timecard, payroll and production
records and verify their accuracy through worker interviews. When violations are discovered, we typically require back-payment of wages as appropriate.
Working Conditions—While outright physical punishment and psychological coercion is rare, examples of violations verified by our team included verbal harassment by supervisors, factory
regulations permitting physical labor as a disciplinary measure (such as sweeping floors), failure to display clear and fair disciplinary procedures and coaching of workers prior to a VCO’s
visit. Violations of most other health and safety requirements, while common, were usually minor. This category also includes a sub-set of provisions (not shown) specific to factoryprovided housing or dormitories.
***Freedom of Association—We believe violations in this area are more widespread than this data suggests. Verified violations included failure by management to meet with and recognize lawfullyorganized unions, retaliation or fear of retaliation against workers who sought to organize and employment applications requiring job candidates to indicate their union affiliation.

15

OUR GLOBAL COMPLIANCE PROGRAM

2003 FACILITY RATING DATACOUNTRYEl Salvador

LEVEL 5LEVEL 4LEVEL 3

LEVEL 2TOTALNUMBER
OF FACTORIESEXCELLENT

GOOD

FAIR

NEEDS
IMPROVEMENTLEVEL 1IMMEDIATE
ATTENTIONREQUIRED

9

0

3

2

0

4

Guatemala

7

0

3

0

0

4

Honduras

18

2

7

4

3

2

Lesotho

16

1

1

3

4

7

Cambodia

33

3

17

10

2

1

China

241

11

71

86

48

25

Rating Factories

For long-term improvement of working conditions, we believe

comparisons with our 2003 data. Our pilot phase will continue

our monitoring will be more effective when we can assess how

through this system conversion and we will continue to evaluate

factories perform over time. Compliance isn’t just about thethe tool for accuracy and effectiveness.

issues we identify during a visit, but the types of violations,
how quickly they are resolved and how often they are repeated.

THE FIVE LEVELS OF FACTORY RATING
Our current rating tool uses a point scale, which is impacted by

In 2002, we developed a tool to help us assess a factory’s

the number and type of violations found and the time needed tooverall level of compliance through quantifiable metrics. The

address them. This scale is grouped into the following levels:

current rating tool rates factories according to the number, type
and pattern of compliance violations during a 12-month period.

LEVEL 5: Excellent
LEVEL 4: Good

Rating factories is harder than it sounds. It requires us to make

LEVEL 3: Fair

subjective decisions about the relative importance of different

LEVEL 2: Needs Improvementsocial issues. For example, core issue violations (see Page 12)

LEVEL 1: Immediate Attention Required

will negatively impact a factory’s rating more significantly thannon-core issues. We have been piloting the tool for the pastA factory receives one of five ratings, from Level 5—excellent,

year and a half and the process has been a learning experience.

where we typically find few or no documented violations, toWhen we evaluated the initial results in mid-2003, we found theLevel 1—immediate attention required, where we might see

ratings did not accurately reflect conditions on the ground. So

many violations, including core and habitual ones. Level 1

we revised the metrics, expanded the scale and introduced newfactories face losing our business unless management shows

weightings according to the severity of the issue.

immediate improvement in their compliance practices.

The chart above shows the 2003 revised ratings for the six

Conditions vary from factory to factory. The type of issues

countries featured in the case studies that follow. Due to the(e.g., core, non-core or habitual), the number of times theytechnical limitations of our system, we are unable to provide

occur and the time it takes to address them can be present indata on a global scale at this time. Toward the end of 2004,

a variety of combinations. For example, a factory can fall into

we will undergo a database conversion that will enable us to

Level 1 because there are many non-core issues, those issues

capture more detailed information on our monitoring efforts.

are habitual and it takes a long time for factory management

This new system will allow for more sophisticated analysis of

to address them. On the other hand, another factory at Level 1

our data and help us to refine our facility rating criteria further.

may have relatively few non-core issues but a number of core

However, as important as these improvements will be to ourissues identified. In other words, factories with very different

ongoing reporting efforts, we will be unable to make futurecompliance pictures can receive the same level rating. 

16

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTCHALLENGES

Introduction

CHINA

CENTRAL AMERICACAMBODIALESOTHOAs our factory monitoring and engagement efforts haveassociation in Lesotho, to the unique challenges offered by

evolved, we’ve found that working directly with stakeholders

countries such as Cambodia and China, we believe that theand leveraging our collective efforts produces the best results.

lessons we’ve learned help us to continually improve andIn the section that follows, we provide a view into our program:enhance our program and impact.

how we put it into action, how key stakeholders view ourefforts and where we see our program going.

We are grateful to our stakeholders who were willing toprovide us with their feedback on our program and on thisThe case studies included here show the kinds of issues wereport. This information, taken together with what we havedeal with and how each factory and stakeholder interaction

learned from our work in factories around the world, haspresents us with opportunities. From our experience withallowed us to better focus on what we still need to do andindependent monitoring in Central America and freedom of

to develop our goals for 2004. 

17

CHALLENGES

Stakeholder Feedback

We recently asked some key stakeholders for their views on

What Should Companies Do to Improve Working Conditions?

where our program is and where it should be heading. Eachshared insights we can learn from; some themes also emerged.

We also asked for their thoughts on what, in general, they thought
multinational companies should be focusing on to have a greater

Participants included: Ineke Zeldenrust, International

impact on factory conditions.

Coordinator, Clean Clothes Campaign International (CCC);

Maquila Solidarity Network (MSN); Alice Tepper Marlin,“If significant progress is to be made in the areas of wages
and hours, freedom of association and other problematic
issues, sourcing strategies need to be rethought, and thedrive to reduce costs at any expense must end.”

President, Social Accountability International (SAI); Carol

Ineke Zeldenrust, CCC

Stephen Coats, Executive Director, United States Labor
Education in the Americas Project (US/LEAP); Dan Rees,
Director, Ethical Trading Initiative (ETI); Lynda Yanz, Coordinator,

Michaels O’Laughlin, Executive Director, Global Alliance for

Most stakeholders felt that we do a good job engaging with

“Addressing working hours is challenging partly because
the issue needs to be tackled on a number of different levels.
Persistent low wages put workers in the position of needing towork excessive hours, that in turn can be detrimental to theirlong term health. More work needs to be done on the concept
and application of the Living Wage.”

manufacturers and other stakeholders to address problems as

Dan Rees, ETI

Workers and Communities (GA); Maggie Burns, Trustee,
Women Working Worldwide; and Bruce Raynor, President,
Union of Needletrades, Industrial and Textile Employees (UNITE).
WHAT IS GAP INC. DOING MOST EFFECTIVELY?

they arise. Our support of training programs for workers andsupervisors on workplace issues was viewed as important.
They were encouraged by the increased inclusion of multiple
stakeholders in the search for more sustainable solutions.

“Multinationals should be sending a clearer message tosuppliers and local governments that compliance withlabor standards is an incentive to sourcing.”
Lynda Yanz, MSN

WHAT DOES GAP INC. NEED TO DO BETTER?

our program. Many want us to evaluate production timelines“Companies need to implement sustainable solutions thatbring positive benefits to workers and also translate into
good business sense for both the brand as well as the
manufacturer.”

and the prices we pay. By better managing both, they believe

Maggie Burns, Trustee, Women Working Worldwide

Criticisms focused on how we could evolve our program andbusiness practices. We were called upon to drive adoption of auniversal code of conduct and institute external verification of

we could help decrease overtime needed to fill orders and help
manufacturers justify the cost of complying with our code. 

18

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTCHALLENGES“There hasn’t been enoughemphasis across theindustry on empowering
workers to exercise theirrights. In many cases
workers are not even awareof what those rights are.”“Some recent changes being perceived

Dan Rees, ETI*

about Gap Inc. are its willingness tolearn from others, its willingness toengage with multi-stakeholder
initiatives and its move towardsustainable programming as opposed
to a policing model of compliance.”
Maggie Burns, Trustee, Women Working Worldwide“Any country where there is no strong
base of civil society groups like
NGOs and unions is problematic.”
Ineke Zeldenrust, CCC“We’ve had ourdifferences with Gap in
the past, and we may
in the future, but when
we started talking withthem, we realized we
could work together
and create positivechange for workers.”“When anissue orproblem in afactory arises,
it’s imperative
for companies
to involve
external
stakeholders
at an earlystage.

”“While it’s encouraging
that Gap Inc. has accepted
freedom of association andcollective bargaining as
unassailable rights, theyneed to improve theirenforcement in this area.

Alice Tepper
Marlin, SAI*”

Stephen Coats, US/LEAP

Bruce Raynor, UNITE* We are members of both SAI’s Corporate Involvement Program and ETI.

19

CHALLENGES

CHALLENGES

Independent Monitoring

In 1995, the National Labor Committee (NLC), a New York-

beginning of the firstbased workers’ rights group, reported alarming abuses at theindependent monitoring program

Mandarin International factory in El Salvador. We dispatchedin El Salvador and in the apparelemployees to investigate and they returned with firsthandindustry globally.

accounts of low pay, excessive overtime and reported unionbusting. Most apparel brands and retailers doing business

BENEFITS & CHALLENGES

with the manufacturer stopped production and left.

As we learned the benefits of
independent monitoring, we

Concerned labor organizations challenged us to take a different

expanded the program to Guatemala in 2000, Honduras andapproach. They encouraged us to keep production in the factory

Nicaragua in 2002, and Kenya in 2003.* We have found

and work with them to improve conditions. We chose to be partthat independent monitoring can complement our program.

of the solution, instead of just leaving the problem behind.

Independent monitors are respected members of the local
community and enjoy credibility among factory workers.

We collaborated with three NGOs—Business for Social

Because they visit fewer factories than our team does, they

Responsibility (BSR), the Center for Reflection, Education,

can focus more deeply on specific facilities, build a greaterand Action (CREA), and the Interfaith Center on Corporate

rapport with workers and discover problems that our teamResponsibility (ICCR)—to form the Independent Monitoringmight miss on a given visit. Their independence from bothWorking Group (IMWG). The IMWG engaged the Grupo defactory managers and us is extremely valuable.

Monitoreo Independiente de El Salvador (GMIES), a group ofrepresentatives from Salvadorean civil society who sought to

Yet independent monitoring is not without its challenges. We

help workers in the maquila sector. The effort marked thewere fortunate in Central America and Kenya to find capable
and respected grassroots organizations. Independent monitoringis a relatively new field and many countries simply do not havegroups with the necessary skills and resources to take on thetask. It takes time and is costly to implement. Unlike externalmonitoring programs that involve a one-time audit, independent
monitoring is an ongoing process of collaboration. Once anissue is identified, our compliance team discusses the findings
with the independent monitors and then negotiates aremediation plan with the manufacturer. Our compliance teamalso continues to maintain their regular monitoring schedules
in each factory.
*In Guatemala, independent monitoring is conducted by the Commission for the
Verification of Corporate Codes of Conduct (COVERCO). In Honduras, we work with the
Independent Monitoring Team of Honduras (EMIH). In Nicaragua, we have engaged
Profesionales por la Auditoría Social Empresarial (PASE), which was formed in 2002 as an
outgrowth of the Movimiento de Mujeres Trabajadoras y Desempleadas “Maria Elena
Cuadra” (MEC). In Kenya, we partner with Africa Now.

20

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTCHALLENGESLEVEL 5LEVEL 4LEVEL 3

LEVEL 2EXCELLENT

GOOD

FAIR

NEEDS
IMPROVEMENTLEVEL 1IMMEDIATE
ATTENTIONREQUIRED

2

13

6

3

10

CENTRAL AMERICA FACILITY RATING DATAA DIFFERENT APPROACH

Working With Gap Inc. in Central America

In 2002 and 2003, the expansion of our sourcing base to

The Regional Initiative for Social Responsibility

Nicaragua and Kenya—two countries with a long history ofand Decent Jobs (IRSTD)**labor and social strife—provided a testing ground for a different

Gap Inc. is one of the few

approach to independent monitoring. For the first time, we

companies doing businessincorporated independent monitors into our initial approvalin Central America that has

process to provide valuable expertise on the ground from theadopted social responsibility

start. During evaluations of new factories, our compliance teamas part of its business policy,

focused on health and safety

taking seriously the issue of complying with labor rights.

inspections and reviewed
documents while the independent

Its suppliers are advised that respect for human rights is part ofmonitors interviewed workers. By

the company’s code of conduct and that producing quality goods

the end of 2003, our team and thein a culture of compliance is a mandatory business requirement;

independent monitors found that

it forms part of the new rules of international commerce. Gap Inc.

none of the four facilities

strengthens these policies by educating their suppliers on how toevaluated in Nicaragua met ourcomply with them. This type of activity is not only improving labor

standards, while four of 11

conditions in factories, but also providing an example to the rest ofreviewed in Kenya were approved.

the national and international industrial sector. It also provides an
incentive for more businesses to include good practices as a

We’re also working with our independent monitoring colleagues

performance indicator of their suppliers.

in Central America and other partners to expand worker andmanagement training. We’ve learned that most cases of non-Certainly there are difficulties to be overcome in order to achievecompliance are signs of bigger challenges. By designing

more improvements and sustainable advances both in physicalprograms that target the root causes of problems and educate

conditions and in labor relations. Suppliers do not always agree toand empower workers, we hope to eliminate some of the

improve their practices and they can always find other clients thatfactors that lead to non-compliance.

are not as demanding in relation to the human rights of their workers.
It is therefore necessary that new incentives motivate suppliers to

Our experience at Mandarin and beyond has taught us that

not only comply with quality and delivery requirements, but also withchange doesn’t happen overnight. But we have learned that realhuman rights, especially the labor rights of workers, throughout theeffort does yield real progress. Through continued collaboration

supply chain. with independent monitoring groups, we will strive to continue
taking steps forward. **The IRSTD is comprised of representatives from the following organizations inCentral America: Grupo de Monitoreo Independiente de El Salvador (GMIES);
the Commission for the Verification of Corporate Codes of Conduct in Guatemala;the Independent Monitoring Team of Honduras (EMIH); Profesionales por la Auditoría
Social Empresarial (PASE) of Nicaragua; the Center for Feminine Studies of the
Dominican Republic; and the Association of Labor Promotion Services of Costa Rica.

21

CHALLENGES

Freedom of Association

A worker’s right to associate freely and not be punished for

DISCOVERING THE PROBLEM;

union activity is an extremely important principle in our CodeFINDING A SOLUTION

of Vendor Conduct. We’ve found that abuses are difficult to

In 2002, MSN, a Canadian-based NGO

discover and prove and even harder to resolve.

focused on improving labor standards
around the world, contacted us about

Violations of our code’s freedom of association requirement
are rarely as straightforward as other issues, such as health andfreedom of association abuses in a
Lesotho garment factory.

safety problems. For example, a worker may allege he was fired
because he supported a union; factory management may argue

An incident in that factory later confirmed MSN’s concerns thatthe worker was fired because he consistently was late for work.

channels of communication between management and theThere may be credible evidence on both sides. Uncovering theworkers had broken down. A worker was injured during an

truth is challenging, particularly in countries where organizedargument with a factory manager. Fortunately, she wasn’tlabor is a relatively new concept, and workers, management

seriously harmed, and although the manager claimed the injury

and governments are learning as they go.

was an accident, an investigation into the incident did reveal
deep tensions between workers and factory management.

We’ve found that our ability to discover violations increases
when we can conduct in-depth interviews with workers andWe began investigating and meeting with the Lesotho Clothing

engage unions and other organizations that have reliable

and Allied Workers’ Union (LECAWU), which represented asources in a factory. A valuable learning experience in Lesotho,

majority of the workers at the factory. Union representatives

a small south African country with a relatively young but

provided examples of how they believed factory management

growing garment industry, helped us evolve how we approach

was interfering with workers’ efforts to organize legally. UNITE,

this issue.

the U.S.-based apparel union, echoed these concerns.
We initiated talks with factory management and senior
executives at the factory’s parent company in Taiwan. Aftermonths of phone calls and meetings, management agreed tohire new supervisors in the factory. While we were encouraged
by its recognition of the importance of hiring management who
understood the value of open communication with workers andworking productively with unions, we also strongly believed that
follow-up was needed to ensure that the change resulted in an
improved factory environment. We had many meetings with the22

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTCHALLENGESLEVEL 5LEVEL 4LEVEL 3

LEVEL 2EXCELLENT

GOOD

FAIR

NEEDS
IMPROVEMENTLEVEL 1IMMEDIATE
ATTENTIONREQUIRED

1

1

3

4

7

LESOTHO FACILITY RATING DATA

Improving Lesotho’s Garment Industry
Lena Kopelow
The Global Training Partnership, Fontheim International
With funding so far from two large U.S. retailers, including Gap Inc.,
new management and provided consultation and reinforcement

the Global Training Partnership’s (GTP) pilot project in Lesotho aimsof our freedom of association expectations. Currently, two

to support the local garment industry and government in taking greater

unions, including LECAWU, represent workers in this factory.

ownership over the improvement of factory working conditions anddeveloping solutions. The specific objectives of the project are to

These efforts led the local branch of the International Textile,

provide relevant training and capacity building activities to the Lesotho

Garment and Leather Workers’ Federation (ITGLWF) togovernment, Lesotho Textile Industry Association, and selected

approach us about further partnership, creating another forum

garment factories, while also conducting ongoing dialogue with thefor concerns to be shared and an additional opportunity to work

International Labour Organization and relevant NGOs. The project istogether to address workers’ concerns. These discussions havescheduled to be implemented over a year’s period.

given us greater understanding of freedom of association
challenges at the factory level in Sub-Saharan Africa.

For Lesotho, the GTP project is timely. With the disappearance ofmining jobs in South Africa and after over a year of famine, Lesotho’s

OUR ROLE

fast-growing garment industry has become critical to the survival of

We strive to protect a worker’s right to freedom of association

nearly 50,000 workers. Thanks to special preferences under the U.S.

without influencing that choice. We believe in working with

African Growth and Opportunities Act, Lesotho’s garment industry has

garment manufacturers and workers to do all that we can toseen tremendous growth over the last few years and has become thecontinually improve conditions and to promote a positive workcountry’s largest employer, exporting over 90 percent of its goods toenvironment. We also facilitate communication between unions,the United States.

management and government officials and share concerns wehave heard from others or witnessed ourselves. We aim to

On the ground, GTP is conducting targeted discussions with thefacilitate workable solutions. Ultimately, government, workers,

government and industry about the growing number of U.S. retailers

manufacturers and civil society as a whole must determinethat take factory working conditions seriously. These brands believe

how freedom of association is upheld in a country. We’rethat if Lesotho is to stay globally competitive, good working conditions

grateful to MSN, UNITE and other stakeholders for engaging

must become a key part of both industry and government strategies.

us on these issues. Their involvement has helped us better

Through direct dialogue and the provision of key tools and training,understand the issues and improve our ability to enforce our

GTP aims to help all stakeholders move toward this goal. code requirements. We’ll continue learning how to be more
effective in this area. 

23

CHALLENGES

Cambodia

The use of child labor is one of the most serious violations

The broadcast provokeda manufacturer can commit. Although extremely rare in ourstrong reaction. The

approved factories, instances do occur—and in these cases,

worker’s age still was

we take aggressive action. A violation typically results inunclear and we knew that

immediate suspension of production, refusal to accept orthere was no definitive

pay for merchandise produced and revocation of approval.

way to settle the dispute.
We were faced with theCambodia illustrates how serious labor allegations have actuallydifficult decision ofstrengthened our program and expanded our engagement withwhether to stay in the factory or leave. As with most factories,

stakeholders. In 2000, a TV journalist with the British

this facility had other compliance issues, but none severe

Broadcasting Company (BBC) contacted us with allegations ofenough to warrant revocation. We had been working withchild labor at a factory in Phnom Penh. We were one of several

the manufacturer to resolve these problems. However, thiscompanies that had production there. The journalist said he had

incident clearly was more serious. We decided to send a strong

found at least one worker—among about 3,800 at the factory—

message that child labor is unacceptable and revoked approval.

who was 12 years old, well under Cambodia’s legal minimum

We also enhanced our age verification requirements at all

working age of 15. We immediately contacted our local teamremaining approved factories in Cambodia. Management mustand sent additional people to investigate.

now verify a worker’s age in two ways: through the worker’s
family book and by checking the worker’s government-issued

At the time, we allowed Cambodian

country identification or election card.

factories to verify a worker’s age using a“family book.” Because decades of war,

CREATING PARTNERSHIPS

genocide and internal strife in Cambodia

The garment industry accounts for about a third of Cambodia’s

destroyed many vital documents such as

gross domestic product and is critical to the nation’s economic

birth certificates, family books were thefuture. The industry provides jobs for thousands of workers,

primary and often the only source of birth dates. The factory’s

especially women who may not have many other employment

records showed the worker was of legal age, but the journalist

options. For these workers, steady incomes often help educate

said he had traveled to the worker’s village and seen a family

siblings and stabilize families who are trying to survive onbook showing she was younger. We sent our own team to thesubsistence farming.

village, but could not verify the claim. In October 2000, the BBC
aired a report citing the allegation and questioning the

Unfortunately, the broadcast prompted some companies toeffectiveness of monitoring programs such as ours.

leave the country, and made others hesitant to use Cambodian
garment factories. We chose to stay in the country, because it

24

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTCHALLENGESLEVEL 5LEVEL 4LEVEL 3

LEVEL 2EXCELLENT

GOOD

FAIR

NEEDS
IMPROVEMENTLEVEL 1IMMEDIATE
ATTENTIONREQUIRED

3

17

10

2

1

CAMBODIA FACILITY RATING DATA

was important to our business interests and to otherProfile: VannChhai Leng

manufacturers who were committed to compliance.

Senior VCO, Cambodia and Vietnam
The diversity of our compliance team is core

We also saw the opportunity to make real progress in laborto our program. VannChhai Leng, Senior VCO

conditions through collaborative initiatives. The presence offor Cambodia and Vietnam, has lived throughthe ILO was an important factor in our decision to remain in

tumultuous periods in Cambodian history. His
experiences—from living in a refugee camp

Cambodia. Through an ILO-sponsored monitoring program,established as part of the 1999 U.S./Cambodia bilateral tradein the 1980s to helping organize Cambodia’s first labor unions in theagreement, Cambodia has one of the world’s most monitored

1990s—have given him an ability to understand the difficulties factory

garment industries. We support the ILO’s monitoring efforts byworkers face.

collaborating with and providing them information regarding ourapproved manufacturers.

“I was born in 1962 into a poor farming family and have passed
through a difficult life. I didn’t have access to formal education or

To complement our efforts, we’re also supporting thenutritious food. I was eight when the war started. I often had to run

Cambodian Labor Training Coalition (CLTC), composed of thefor my life during attacks.

Cambodian Labor Organization, Khemara and the Cambodian
Human Rights Task Force. This two-pronged program promotes“From 1980 to 1992, I stayed in a refugee camp. Then I went homesustained improvement in the workplace. Factory management

to make a living with nothing but my knowledge from the jungle.

is taught about labor relations and modern management models.
Workers learn about labor laws, their rights and communication“All life’s difficulties are valuable assets. They help me cope withskills. In 2003, the CLTC completed its pilot phase in fourand overcome any situation. It is an asset to be patient, understanding

factories. We hope to expand the program in 2004. and tolerant. It is important to forgive.
“I am motivated by the positive changes I can bring about, andthe chance to make a contribution to my community. When I
compare today with life 20 years ago, I work even harder. My
experiences help me build friendly relationships with different
groups of people, regardless of their background, political affiliation
or social status. I try to put myself in their situation. I view it all as alearning process.” 

25CHALLENGESSECTIONHEADINGS
E C T I O NH
EADING

China

China is the world’s largest garment manufacturing market,
and most apparel brands and retailers do business there toremain competitive.
Although only one of about 50 countries where Gap Inc.

factory found to withhold or fabricate requested documents.

sources merchandise, China is the company’s biggest

A policy is only as good as the willingness to enforce it andsourcing market. In 2003, the country represented 16 percent

we do not hesitate to make good on this threat.

of our total merchandise units purchased and 17 percent of
total merchandise costs. Because of its size, China’s garment

WORKING WITH FACTORIES

industry wields significant global influence, but because of the

Too many manufacturers view compliance as something wecountry’s history, political system and culture, it also poses

impose on them, instead of a smart way of doing business.

unique and complex compliance challenges. Ensuring thatIn 2001, our China team developed an innovative program toworkers’ needs and grievances are addressed is especiallyencourage manufacturers to assume greater ownership forchallenging in a country that doesn’t recognize workers’

labor conditions by creating their own compliance programs.

rights to associate freely outside of government-approved

We encourage manufacturers to develop their own

organizations.

comprehensive codes of conduct that meet or exceed the

Our compliance expectations of manufacturers in China aretraining of staff to implement the codes and the development

no different than those in any other country. In 2003 Chinaof their own internal grievance processes.

standards of their customers. We also advise them on theaccounted for the highest percentage of factories revoked
for compliance violations. Concealment of overtime andThese internal factory compliance programs supplement

unwillingness to share complete and accurate documentation

but do not replace our own monitoring. At the end of 2003,

were the main reasons

approximately 90 out of 241 approved factories in China were

for the high number ofparticipating in this initiative. About a third of these factories

revocations. Althoughhave fully embraced the concepts, and we hope to see similar

these are industrywide

progress in the remaining factories. We believe the program will

issues in China, ourprovide long-term benefits and have begun to apply the concept

VCOs make it clear fromin other countries.

their first meeting withpotential manufacturersthat we will suspend
business with any

26

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTCHALLENGESLEVEL 5LEVEL 4LEVEL 3

LEVEL 2EXCELLENT

GOOD

FAIR

NEEDS
IMPROVEMENTLEVEL 1IMMEDIATE
ATTENTIONREQUIRED

11

71

86

48

25

CHINA FACILITY RATING DATARUNNING BETTER FACTORIES

Helping Workers Understand Their Rights: Mingyu Chen

Another ongoing challenge we face is the lack of supply chain

Many Chinese garment

management skills among some manufacturers. Worldwide,

workers travel a long

many compliance issues arise from poor management skills

way from home to work

and inefficient operating practices. In any workplace, poorin factories. They facesupervisory and communication skills often result in worker

tremendous difficulties—

grievances. Inefficient production lines waste materials anddiscrimination in the cities, mistreatment by recruitment agents andcontribute to excessive overtime hours and poor product quality.

factory supervisors and a lack of knowledge about their rights under

Since we know that better-run manufacturers and factories have

Chinese provincial and local law.

fewer compliance issues, we are exploring ways to help
manufacturers strengthen their management skills and improve

In 2002, we approached Mr. Mingyu Chen about speaking to garment

their overall operations.

workers regarding their rights. Mr. Chen was 17 when he left his homevillage to work in China’s industrial zone, and he understands firsthandIn 2003, we initiated a partnership with IMPACTT, a consultancy

the challenges migrant workers face. In 2000, after four years of

based in the United Kingdom, and the Hong Kong Productivity

studying law at night, he realized workers needed help. He started aCouncil (HKPC) to help five manufacturers in China improve

workers’ telephone hotline. In the past three years, Mr. Chen has

their supply chains and create better working environments.

provided free legal consultation to more than 12,000 callers.

IMPACTT and HKPC conducted evaluations of each factoryand made several key findings. Worker turnover was high,

Mr. Chen was hesitant about working with a multinational company.

suggesting a variety of problems, including poor internal

However, after consideration, he agreed to conduct voluntarycommunication and low pay. Production levels were low because

lunchtime training sessions at several of our approved manufacturers.

supervisors were not being held accountable for what passed

In each session, Mr. Chen reviews Chinese labor law, the rights ofthrough their sewing lines. Material costs were high due toworkers and management’s responsibilities. He advises workers how

waste and inefficiency in the production process.

to seek recourse if their rights are violated. He also hands out his cardand invites them to call if they need help.

Late in 2003, IMPACTT and HKPC began working with factory
managers to develop and implement better operating

Mr. Chen provides workers not only with knowledge, but also theprocedures and management practices. We expect that thepossibility of solutions. To date he has visited about 20 percent of ourmanufacturers participating in the program will benefit fromapproved manufacturers in China. We hope he will eventually reachand embrace these practices as a better way of doing business.

all of them. 

If the initial pilot is successful, we hope to expand the programin 2004. We look forward to reporting on our progress. 

27

CHALLENGES

Since late 2002, Gap Inc. has been working with a group of
stakeholders to explore opportunities for greater transparency
and increased sustainability of our work. Five organizations
comprise the Public Reporting Working Group: Domini Social
Investments, the Calvert Group, the As You Sow Foundation,
the Center for Reflection, Education and Action (CREA) andthe Interfaith Center on Corporate Responsibility (ICCR).

Increasing Transparency

Public Reporting Working Group Statement

issues. Importantly, it illustrates the need for partners from among the

As socially responsible investors, we engage in long-term dialogue

broad spectrum of NGOs including groups from the human rights, laborwith corporations, seeking to encourage the development ofand religious sectors. It reminds us over and over that compliance is acompliance systems that will consistently work to improve theprocess, and it is not easy.

conditions under which workers earn their living throughout the global
supply chain. This report is the result of one such ongoing dialogue.

We expect that in the future, the company will provide the public withfactory specific data to permit stakeholders to better understand theWhen we began discussions with Gap Inc., we were seeking greater

complexities of compliance and to measure Gap Inc.’s performance

public transparency. We wanted to understand what Gap Inc. is doingover time. In essence, it should provide the substance of publicand how it responds to specific situations. We wanted to be able toaccountability expected of any leading company.

pick up a report and review Gap Inc.’s performance over time, andrelative to its peers. Today, there is no generally accepted reporting

Gap Inc. has been recognized for its leadership in independent

format for supply chain compliance. Eventually, we hope that thismonitoring as a component of ongoing compliance. This report is adialogue will produce a model format that other companies can adapt,strong first step toward establishing Gap Inc. as a leader in public

and improve upon. Gap Inc. has engaged in this process with creativity

reporting as well. and enthusiasm, and it has been our pleasure to participate.

Adam Kanzer, Esq., Domini Social Investments LLC
This report is a summary of Gap Inc.’s compliance efforts during 2003.

Alya Z. Kayal, Esq., Calvert Group Ltd.

As such, it helps us to see what has been done, what could have been

Conrad MacKerron, As You Sow Foundation

done better, and what needs to be changed for the future. What is

Ruth Rosenbaum, TC, Ph.D., CREA: Center for Reflection, Education

obvious throughout is that compliance is intended to benefit workers. In
our view, corporate social compliance systems should exist to bringworking conditions in line with internationally accepted human rights
standards. These systems are critically important to helping workers
protect their rights. We commend Gap Inc. for recognizing that its codeof conduct sits within this broader context of international human rights
norms. It is an important recognition of public accountability.
This report contains a great deal of information that many companies
have not provided publicly, and includes valuable insights from acompany that we believe is sincerely struggling with these complex

28

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT

and Action, Inc.
David M. Schilling, Interfaith Center on Corporate Responsibility

CHALLENGES

Looking Forward

Not long ago, a code of conduct was a new concept for global

2004 Key Goals

apparel brands. Now, it is a norm in our industry. While theproliferation of codes has led to new goals—such as efforts to

Participate in an SAI pilot compliance program evaluation.

develop a universal code and more consistent enforcement—

Support multi-stakeholder efforts to develop universal

it also demonstrates progress. Experience has opened us up tocode of conduct.

a broader perspective and deeper understanding of labor issues.

Identify supply chain practices that may impact factory

We have learned repeatedly that working together is moreworking conditions.

effective than working alone. Our industry is too fragmented

Broaden worldwide stakeholder engagement and initiatives.

and the issues are too broad, too complex and too fluid for
one company to have substantial or sustained impact.
supply chain practices, such as frequent changes to or rushing
Leadership in this area means something different today than itof orders, that may impact working conditions in factories.

did a decade ago when our Global Compliance department wasformed. While we have developed a strong internal monitoring

OUR EXTERNAL ENGAGEMENT

program, we recognize that monitoring alone is not enough.

We will continue to expand our global external engagement

Broad-based ownership of and accountability for labor standards

efforts in 2004. The success of worker training programs in

is most likely to grow from innovation, engagement andChina and Cambodia has encouraged us to pilot similar

collaboration with both internal and external partners.

programs in Central America. Our involvement withorganizations such as SAI, GA and ETI is opening up a dialogue

OUR MONITORING PROGRAM

with other global brands, and encouraging us to pursue more

Factory monitoring will remain an important part of our program.

collaborative projects. This will allow us to leverage the

It is critical for us to know what is happening in the factories

experience of others to develop and achieve common

that produce our clothes and to enforce our code. To help us

objectives to improve working conditions across the industry.

better assess the strengths and weaknesses of our program,

We hope that these multi-stakeholder efforts will help foster

SAI will conduct a review of our compliance systems andgreater industry responsibility for the creation and enforcement

processes in 2004. A summary of this evaluation will be madeof labor standards.

publicly available.
This report is a first step toward our goal to provide greater
OUR SUPPLY CHAIN

transparency into our compliance program. We will continue to

We recognize that opportunities remain to improve labor

share more about our efforts through our Web site and otherstandards by achieving alignment within our own supply chain.

external communications. We look forward to your feedback

In 2004, we will continue our work to identify and address

and to reporting further on our progress in 2005. 

29

BROADER COMMITMENTS

Currently, our Board has 13 directors,
nine of whom are independent of thecompany and its management.

Corporate Compliance and Governance

BROADER COMMITMENTS

BOARD ENGAGEMENT

Just as our Code of Vendor Conduct sets forth ethical operating

Our directors make a significant time commitment to ensure

standards for garment manufacturers, our internal ethics code—

the Board is actively engaged. New members are expected to

the Code of Business Conduct—governs our own businessparticipate in a formal onboarding program. In addition, thepractices. These codes help us ensure that social

Board has adopted a continuing education program for existing

responsibility—whether reflected in how we run our businessdirectors. The full Board meets every other month and Boardand manage our environmental impacts or how we support ourmembers often work with management outside of formal

employees and the communities where they live and work—

meetings. Board members participate in a two-day annual

is ingrained into how we do business.

strategy meeting as well.

CORPORATE COMPLIANCE & GOVERNANCE

BOARD DEVELOPMENT & EFFECTIVENESS

We believe that good corporate compliance and governance

The Governance, Nominating and Social Responsibility

means going beyond what we have to do. It means being acommittee annually reviews and assesses the composition

leader, especially in business ethics, and ensuring that weand overall performance of the Board, its committees and each

communicate frankly with our shareholders, customers andindividual director. As part of this process, each Board member

employees. We are committed to continually evolving ourmust participate in an extensive performance evaluation

corporate compliance and governance programs in line withprocess, including individual peer assessment, in order

legal and regulatory requirements, corporate ethics best

to be nominated for re-election.

practices and our own high standards.
CODE OF BUSINESS CONDUCTBOARD INDEPENDENCEAll Gap Inc. employees and directors must adhere to ourCurrently, our Board has 13 directors, nine of whom are

Code of Business Conduct, which is designed to avoid conflicts

independent of the company and its management. At everyof interest, achieve compliance with laws and protect our

Board meeting, time is set aside for the independent directors

company assets. Reflecting the global reach of our company

to meet without the presence of management. In 2003, theand diversity of our employees, the Code of Business Conduct

Board appointed a Lead Independent Director who chairs theseis published in 10 languages. We regularly remind employees

meetings. Only independent directors may serve on the Board’sof their obligation to act responsibly and with integrity whenthree committees—Governance, Nominating and Social

conducting our business by reinforcing the code throughResponsibility; Audit and Finance; and Compensation andemployee communications, including workplace posters,

Management Development.

distribution of the card shown at the top of Page 31, regular
articles on our internal Web site and employee training sessions.

30

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTBROADER COMMITMENTS
Gap Inc.

CODE OF BUSINESS CONDUCT

Code Hotline

Callers from the U.S., Canada and Puerto Rico call
1-866-GAP-CODE (toll free)International callers 1-770-582-5221(operator assisted free call)
Doing the Right Thing

TRANSPARENCY

Code Violations to Report

We make sure that key corporate compliance and governanceinformation and documents are accessible to shareholders

Accommodations for disability

and other stakeholders. Our Corporate Governance Guidelines,

Accounting or auditing concerns

Board committee charters, Code of Business Conduct and other

Conflict of interest

information about our company’s practices are all available at

Discrimination or harassment

gapinc.com.

Fraud or theft
Health and safety

COMMUNICATION

Inaccurate recordkeeping

Our shareholders, customers, employees and the public can

Insider trading

communicate directly with the Board regarding any governance

Workplace violence

matter by emailing board@gap.com. Our Chairman and our Lead

Any other suspected code violation

Independent Director, as well as our Corporate Compliance andGovernance team, reviews every email received.
CORPORATE COMPLIANCE
This Board email is yet another way—in addition to our& GOVERNANCE DEPARTMENT

Code of Business Conduct hotline—that anyone can contact

Under the guidance of Executive Vice President,

the company regarding our business practices. Our Code ofChief Administrative and Compliance Officer Anne Gust,

Business Conduct hotline allows anyone to confidentially and,the company’s Corporate Compliance and Governanceif desired, anonymously report concerns regarding our businessdepartment leads the company’s efforts to promote andpractices by calling (866) Gap-Code in the United States, Canada

enforce compliance with our Code of Business Conduct,

and Puerto Rico (toll-free) or (770) 582-5221 elsewhere

the foundation of our corporate compliance program. The(operator-assisted free call). Code of Business Conduct

Corporate Compliance and Governance team monitors andconcerns may also be sent directly to our Corporate

audits code compliance, raises code awareness throughCompliance and Governance team by emailing them at

employee communication and education and investigatescorporate_compliance@gap.com.

and responds to all suspected code violations.
A combination of written guidelines, formal processes andmanagement oversight helps us ensure that strong corporate
compliance and governance isn’t just words on paper, but
a way of doing business at Gap Inc. 

31

BROADER COMMITMENTS

Environment

We understand that the operation of our stores, distribution
centers and offices and how we use natural resources—
whether it is for construction, office supplies or marketing
materials—affects the environment. Our goal is to balance
our environmental impacts with our business needs.
CONSERVING ENERGY
We are constantly looking for ways to reduce our energy use.
One way we have succeeded is by improving our store design,building standards and operations. Stores built today are roughly
25 percent more energy efficient per square foot than those
opened in 2000, and almost 29 percent more efficient thanthose built in 1990.
Energy use in about 40 percent of our U.S. stores is monitored

WASTE REDUCTION

through a computerized energy management system (EMS).

We know that our

EMS enables us to monitor system performance and identify

environmental success

opportunities to further reduce our energy consumption.

depends on employee
participation. All employees are asked to reduce waste, recycle

By taking simple steps at our distribution centers, such as

and purchase products that contain post-consumer recycled

resetting thermostats, installing energy-efficient light fixturesmaterial. In 2003, we recycled approximately 20,000 tons ofand automatic controls for conveyor systems, we’ve decreased

paper and cardboard. Many of the cardboard boxes we use haveenergy consumption by approximately 15 percent. These anda minimum post-consumer or recycled content of 20 percent,other improvements in our logistics division have resulted inand some with content as high as 30 percent.

average annual savings of nearly $1.6 million since 2001.
The standard paper used in our corporate offices has 30 percent
We’ve received recognition for our environmentally sustainable

post-consumer content and all copy machines have beenbuildings, such as our corporate offices at 901 Cherry Avenue inprogrammed to default to making two-sided copies. In 2003,

San Bruno, California (pictured above), and our new headquarters

we initiated a composting program at our employee cafes in ourbuilding in San Francisco (see Page 33). The use of innovative

San Francisco Bay Area headquarters offices. This allows us tofeatures such as a grass roof and fly ash in these projects has

divert approximately 15,600 pounds of waste from landfills eachinspired others to incorporate them into their buildings.

month that is turned into nutrient-rich topsoil.

32

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTKILOWATT HOURS PER SQUARE FOOTPER YEAR

BROADER COMMITMENTS

50
45
40
35
30
25
20
15
10

AVERAGE ENERGY CONSUMPTIONIN GAP INC. U.S. STORES

5
0
2001

2002

2003

COMPLYING WITH ENVIRONMENTAL REGULATIONS

Environmentally Sustainable Buildings

We want to make it easy for our employees to meet the mostSince its completion in 1997, our 901 Cherry Avenue building—basic of our ethical standards—complying with the law. Gap

part of our San Bruno, California, headquarters campus—has beenInc.’s environmental compliance program is comprised ofheralded for providing a quality work environment while minimizing

procedures, policies, guidelines and trainings to assist

its impact on our natural resources and the environment.

employees throughout the company to comply with local,
state and federal environmental regulations.

One of the building’s most striking features is the roof—it’s coveredin native grasses. An excellent insulator, this unique covering provides

MOVING FORWARD

increased energy savings year-round. It also restores natural habitat

The following initiatives are examples of ways we hope to keep

and reduces runoff during the rainy season.

moving our environmental practices in the right direction:
Unlike most office buildings, the exterior windows actually open.
Climate Leaders—In 2003, we joined the U.S. Environmental

In addition, an under-floor ventilation system stores cold night air

Protection Agency’s Climate Leaders program. This voluntary

and uses it to cool the building throughout the day. The extensive

partnership between industry and government encourages

use of windows provides natural light. When artificial lighting iscompanies to reduce their greenhouse gas emissions.

used, computer-activated lamps gradually fill in for the fading daylight.
Occupancy sensors turn lights off when personal offices andEnvironmental Metrics—In 2004, we plan to implement a

conference rooms are vacant.

companywide tracking system to better capture and measure
what we currently do and to set priorities for our future

Almost all interior wood and wood veneer used for floors, doors andenvironmental efforts, as well as increase transparency.

wall paneling was harvested from certified, well-managed forests.
Low-toxic paints, carpets and tile adhesives, as well as formaldehyde-

Water in Manufacturing Facilities—We have been

free particleboard are used throughout.

instrumental in working with Business for Social Responsibility
to bring together a group of apparel companies to share best

Our newest building in San Francisco promoted ecological construction

practices and collaborate on an industrywide standard toin another way. Fly ash, a waste by-product from coal-burning power

improve garment manufacturers’ wastewater treatment. Whileplants, was used in the concrete for the foundation. Not only did thiswe have tried to implement our own programs in the past,

project divert 1,800 tons of fly ash from landfills, it also eliminated

we hope this collaborative approach will result in greater, more

approximately 2,000 tons of carbon dioxide emissions that would havesustainable improvements. 

been generated during cement production. That’s the equivalent ofroughly 350 people not driving their cars for an entire year. 

33

BROADER COMMITMENTS

Our Employees

Gap Inc. is made up of smart, diverse,
fun, talented individuals working around theworld in areas from design to distribution
to marketing to merchandising. Working at Gap Inc. requires
a passion for our products, a commitment to exceeding the
expectations of our customers, boundless energy and a healthy
dose of creativity.
With more than 150,000 employees around the globe, Gap Inc.
has a responsibility to maintain a workplace in which they can

its Board of Directors. Four directors of our 13-member Board

thrive. Beginning on the first day of employment, we inspire

are women, more than double the state and national averages.

our individuals and teams to reach their full potential throughCurrently, five of the 12 top Gap Inc. executives are women.

a variety of development programs. Training curriculums andlearning environments range from classroom sessions to in-

At Gap Inc., we believe diversity reflects more than physicalstore experience; from on-the-job coaching with a supervisor

traits; it involves how individual differences—in experience,

to online resource guides and tools. Ensuring an ethical,

culture, opinion, style and viewpoint—influence the way weinclusive work environment and comprehensive, competitive

work with each other and serve our customers. We are an

benefits programs for our employees worldwide is equally key

equal opportunity employer and strictly enforce our “Zeroto our efforts.

Means Zero” policy regarding harassment and discrimination.
To expand these efforts, we created a global diversity council
AN ETHICAL & INCLUSIVE WORKPLACE

that is developing strategies and recruiting a Vice President ofHaving a diverse workforce and clearlyDiversity, a new position we hope to fill in 2004.

defined workplace policies is not just awell-intentioned goal—it’s essential to

Our global Code of Business Conduct further demonstrates

how Gap Inc. does business.

our commitment to providing a responsible and ethical work
environment for all our employees. It contains guidelines on

34

In fact, Gap, Inc. ranked

proper workplace behavior and how to raise questions or

fourth highest among

concerns. Our hotline allows employees—or any member

California-basedof the public—to anonymously report code violations atcompanies on the(866) Gap-Code in the United States, Canada and Puerto Rico

Fortune 1000 list for the(toll-free) or (770) 582-5221 elsewhere (operator-assisted

percentage of women on

free call).

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTBROADER COMMITMENTS

HEALTH, WELLNESSSUPPORTING FINANCIAL HEALTH& LIFESTYLE

The financial well-being of our employees is very important.

Gap Inc. offers a range ofIn addition to providing competitive compensation programs,

programs for our employees.

we offer a 401(k) plan to employees with one year of

Benefits range from a generous merchandise discountemployment that features dollar-for-dollar company matching

to a gift-matching program for both charitable donations

contributions up to four percent of pay, with 100 percent

and volunteer time. Full-time employees also have access

immediate vesting. Employees can participate in our Employee

to medical, dental, vision, life and disability insurance andStock Purchase Plan (ESPP) and purchase Gap Inc. stock at aour Employee Assistance Program, a confidential service that

discount that’s at least 15% below market

provides resources for employees and their families coping with

rates. Last November, Gap Inc.’s ESPP

personal issues. In addition to a generous Paid Time Off (PTO)

purchase represented a $5 million savingsplan, employees can donate their earned time off to co-workers

for employees. Employees also can accessin need through the PTO Donation Fund. We are continuing tofree financial planning services to help

expand our free employee wellness programs, including a newthem get the most out of these programs

health information Web site, 24-hour medical hotline support

and achieve their financial goals.

and a healthy pregnancy program.
Gap Inc. offers tuition reimbursement to
Gap Inc. supports new parents in a variety of ways. Parental

qualified employees so they can enroll inleave is available for both the birth and adoption of a child, andclasses to enhance their job knowledge

flexible phase-in and phase-out scheduling provides an easierand skills. The company spends abouttransition both out of and back into a regular work schedule.

$1.4 million per year on this tuition
reimbursement program.

In the United States, most benefits are available to full-time
employees on their first day and are extended to their eligible

We know that our business successdependents, including children, spouses and same-sex life

depends on Gap Inc. giving our employees meaningful work andpartners. In other countries, similar benefits are offered

great careers. That’s why making our company a great place todepending on the benefit plan and location. In 2003, wework and a true community for our employees will always be aspent more than $500 million on benefits worldwide.

top priority. 

35

BROADER COMMITMENTS

Community Involvement

For nearly three decades, Gap Inc.’s charitable arm,

• Sojourn to the Past (San Francisco Bay Area)—AnGap Foundation, has spearheaded the company’s community

educational program through which high school students

involvement efforts through grants, in-kind donations,and educators visit the most dramatic sites of the civil rights

community outreach and employee volunteer programs.

movement in the United States. Participants learn the reallessons of the movement—tolerance, justice, compassion,

GIVING MONEY

hope and non-violence.

During the past five years (1999-2003), Gap Foundation
distributed approximately $60 million in cash grants worldwide,• Sargent Cancer Care for Children (UK)—This national charity

representing approximately one percent of net earnings before

funds a network of skilled social workers in all major cancer

taxes for the period. Through the Gap Foundation, the company

centers in the United Kingdom, offering counseling, financial

also makes substantial product donations each year. For

help and practical care to critically-ill children and their families.

example, in 2003, more than $12 million in product donations
were made to non-profit organizations to help people in need.

• CARE (Cambodia)—A health program that targets the needs

Recipient organizations range in size from national groups, suchof garment workers and their families, this program improves

as Boys & Girls Clubs of America (B&GCA), to local projects,

access to clinical services for workers and promotes education,such as the rebuilding of the Zabalaza Junior Primary School inawareness and prevention of HIV/AIDS and other sexually

South Africa.

transmitted diseases for workers and factory clinic staff.

In 2002, B&GCA launched its first ever Web-based program.

EMPLOYEE GIVING

CareerLaunch™—a career exploration program fully fundedGap Foundation matches, dollar-for-dollar, the charitable

by Gap Foundation—is designed to help teens make sounddonations of individual employees to qualifying organizations—educational decisions, learn about career opportunities andup to certain limits.

prepare for the workforce. CareerLaunch™ is available tomore than 3,300 Boys & Girls Clubs nationwide (see Page 38).
A snapshot of other organizations funded by Gap Foundation:• Harlem Children’s Zone (New York)—This pioneering,
non-profit, community-based organization works to enhance
the quality of life for children and families in some of New York
City’s most devastated neighborhoods. Their 15 centers serve
more than 12,600 children and adults.

36

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTBROADER COMMITMENTS

The Gap Foundation supports organizations focused on children,
youth and families. Immediately left, Marka Hansen, Banana Republic
President, and friends at Halloween pumpkin patch event. Opposite
page, lower right, former President Jimmy Carter in front of Gap Inc.
funded—and employee-built—Habitat for Humanity house.

GIVING TIME

Community Corps

In 2003, Gap Inc.

Community Corps was created for employees like Jennifer, a Banana

employees volunteered

Republic store manager in the Boston area.

nearly 22,000 hours of company-paid time through Gap
Foundation volunteer programs. The Foundation’s “Take Five”

A longtime community volunteer, Jennifer has participated in the Walk

program allows headquarters employees five hours of time off

for Hunger, the Boston to New York AIDS ride, and has volunteered at

per month to volunteer during the workday.

the New England Aquarium for 10 years.

The “Money for Time” program encourages employee

She was one of 30 Gap Inc. employees selected for the Community

volunteerism by providing cash grants to organizations where

Corps project in Honduras in September of 2002.

employees volunteer. For every 15 hours an employee
volunteers at a qualified organization, the Foundation grants“I’ll never forget the first day. The mother, Ina, came by the housethat organization $150.

and when she saw us, she came and hugged us and kept thanking us,”says Jennifer. “It made me realize what a huge impact we were having

Gap Inc. also recognizes dedicated employee volunteers

on this family.”through the “Community Corps” program. Employees apply
for the opportunity to build homes in partnership with Habitat

The trip also taught her a lot about the company and her co-workers.

for Humanity International. Gap Foundation
provides 100% of the funding needed to“It was eye-opening to find out about what Gap Foundation does andbuild these homes. The

really inspiring to learn how other people across the company were

program began in 2000

involved in their communities.”

and to date we’ve
funded and built more

Since her Community Corps trip, Jennifer has returned to Honduras tothan 25 homes in Alaska,

work on Habitat projects several times. In February 2003 she helped

Alabama, Arizona,lead a team there and was able to share her past experiences.

Georgia, Mississippi,
Tennessee and in“In one section of the training they talked about Gap Inc.’s Community

Honduras, Mexico,

Corps. I was able to tell the group that that was how I got involved with

Guatemala andHabitat,” she says. “Everyone was so impressed that my employer did

El Salvador. 

something like that. It really made me proud to work for thiscompany.” 

37

BROADER COMMITMENTS“Gap Foundation isn’t just about giving money; it’s about
giving hope—often to those who feel they have none.”
Dotti Hatcher, Vice President, Gap Foundation

Community Involvement

Helping Teens Find Their Paths
Today’s teens are faced

The program’s real-world

with a tremendous number

applicability is a keyof educational and careercomponent. Each

options. Many just don’t

participant receives aknow where to start inresource guide withdeciding where to go to school or how to look for that first full-time job.

practical interviewing andBoys & Girls Clubs of America’s CareerLaunch™ program—funded by

job tips. Everything froma $7.5 million Gap Foundation grant over seven years—aims to help

how to fill out a job

students take some of the guesswork out of their educational andapplication and dress for an interview, to how

career decisions.

to write a resume and cover letter is included.

The program incorporates a strong mentoring element with practicalThrough CareerLaunch™, Gap Foundation isresources teens can use. Participants research school and career

helping Boys & Girls Clubs enable teens tooptions on the CareerLaunch™ Web site. There they can assess theirsuccessfully transition into the challenging job

interests and access job profiles that parallel them. They also canmarket. We hope that it allows them to imagine

garner information on approximately 9,000 colleges and technicalwhat their future could be while helping themschools, determine their eligibility requirements

take concrete steps to get there. and can even apply for financial aid. There’s also
an easy-to-use career exploration guide thatoffers a range of career planning and job skills
exercises that Club staff or volunteers can use
with teens.
“CareerLaunch is truly a ‘generation-changing’
program,” says Roxanne Spillett, President ofBoys & Girls Clubs of America. “It not only
teaches Boys & Girls Club teen members how to
become more employable today, it also equips
them with the know-how to make one of themost important decisions of their lives—theirchoice of career.”38

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORT“CareerLaunch is truly a‘generation-changing’
program,” says Roxanne
Spillett, President of Boys
& Girls Clubs of America.

FEEDBACKWe want to know what you think about this report,so please let us know how we did. Your feedback
is essential in helping us expand and improve oursocial responsibility efforts. Thank you.

1. What was your opinion of Gap Inc.’s social responsibility efforts
before reading this report?
EXTREMELY
EXTREMELYUNFAVORABLE

1

FAVORABLE2

3

4

2. What is you opinion of Gap Inc.’s social responsibility efforts
after reading this report?
EXTREMELYUNFAVORABLE

1

2

3

5

EXTREMELYFAVORABLE

4

5

3. On a scale of 1 to 5, with five being excellent, rate the following
components of the report:
Overall Report

1

2

3

4

5

Overall Labor Standards Information

1

2

3

4

5

Labor Standards Data

1

2

3

4

5

Labor Standards Case Studies

1

2

3

4

5

Other Areas of Social Resonsibility

1

2

3

4

5

4. I am a/n (optional):

Customer

Shareholder

Gap Inc. Employee

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Representative of anon-governmental organization

Other
PLEASE SPECIFY

If you have other thoughts on our report or on how we can better
communicate about our social responsibility efforts, please email
us at social_responsibility@gap.com.

GAP INC
SOCIAL RESPONSIBILITY REPORT FEEDBACK
2 FOLSOM ST
SAN FRANCISCO CA 94105-9389

POSTAGE WILL BE PAID BY ADDRESSEEFIRST-CLASS MAIL PERMIT NO. 27143-SF SAN FRANCISCO, CA

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IF MAILEDIN THEUNITED STATESGLOSSARY

Glossary
Business for Social Responsibility (BSR)—A global organization that helps member
companies achieve success in ways that respect ethical values, people, communities andthe environment. For more information, visit them at www.bsr.org.
Cambodian Labor Training Coalition (CLTC)—Composed of the Cambodian Labor
Organization, Khemara and the Cambodian Human Rights Task Force, a two-pronged
training program that promotes sustained improvement in the workplace.
Child labor—As defined in the Gap Inc. Code of Vendor Conduct, the employment ofworkers who do not meet the applicable minimum legal age requirement or are not atleast 14 years of age, whichever is greater.
Code of Vendor Conduct—Basic requirements set forth by Gap Inc. that all
manufacturers and factories must be able to meet in order to do business with thecompany. The code provides the foundation for Gap Inc.’s ongoing evaluation of amanufacturer’s employment practices and environmental compliance.
Code of Business Conduct—Gap Inc.’s internal ethics code that governs businesspractices and is designed to help the company and its employees avoid conflicts ofinterest, achieve compliance with laws and protect company assets, including employees
and properties.
Corporate Governance and Compliance—The Gap Inc. department responsible for
enforcing the company’s Code of Business Conduct and ensuring that the company’s
practices and policies are in keeping with legal and widely accepted ethical standards.
Ethical Trading Initiative (ETI)—An alliance of companies, NGOs and trade union
organizations committed to working together to identify and promote ethical trade. For
more information, visit them at www.ethicaltrade.org.
Forced labor—As defined in the Gap Inc. Code of Vendor Conduct, prison, indentured,debt bondage or involuntary labor of any kind.
Foreign contract workers—Workers who sign an employment contract to work at afactory outside their home country.
Freedom of association—As defined in the Gap Inc. Code of Vendor Conduct, the rightof workers to lawfully join associations of their own choosing, peacefully associate,
organize or bargain collectively.
Garment manufacturers—Third-party manufacturers with whom Gap Inc. contracts tomake its apparel. Sometimes, a garment manufacturer has only its own facility. Other
times, it may own more than one factory and/or subcontract with others.
Global Alliance (GA)—A partnership of private, public and NGOs established to
improve the workplace experience and future prospects of workers involved in global
production and service supply chains in developing countries. For more information, visit
them at www.theglobalalliance.org.
Global Compliance—The Gap Inc. department responsible for enforcing the company’s
Code of Vendor Conduct in the manufacturing facilities that produce its apparel and forstakeholder engagement in the area of labor standards and working conditions.
Global Reporting Initiative (GRI)—A multi-stakeholder process and independent
institution whose mission is to develop and disseminate globally applicable sustainability
reporting guidelines. For more information, visit them at www.globalreporting.org.
Hong Kong Productivity Council (HKPC)—A multidisciplinary organization
established by statute in 1967 to promote increased productivity and the use of more

efficient methods throughout Hong Kong’s business sectors. For more information, visit
them at www.hkpc.org.
IMPACTT—A UK-based consultancy group that works with companies, organizations
and individuals to develop business practices which extend the number of people who
benefit from international trade and investment. For more information, visit them atwww.impacttlimited.com.
Independent monitoring—Ongoing monitoring of working conditions conducted by
local non-profit, civil society organizations at the request of companies or internationalorganizations. Independent monitoring groups usually report their findings publicly.
Independent Monitoring Working Group (IMWG)—A collaboration between Gap
Inc., Business for Social Responsibility, the Center for Reflection, Education, and Action,and the Interfaith Center on Corporate Responsibility, which resulted in the firstindependent monitoring program in El Salvador and in the apparel industry globally.
International Labour Organization (ILO)—The United Nations (UN) specialized agency
that seeks the promotion of social justice and internationally recognized labor rights.
Maquila Solidarity Network (MSN)—A Canadian-based NGO focused on improving
labor standards around the world. For more information, visit them at
www.maquilasolidarity.org.
Multilateral organizations—International organizations consisting of multiple nations
and/or other significant parties.
Non-governmental organizations (NGOs)—National, international and communitybased groups that raise awareness about social, environmental, community and humanrights issues.
Public Reporting Working Group—A group of stakeholders Gap Inc. has beenworking with since late 2002 to explore opportunities for greater transparency andincreased sustainability of our work. This working group is comprised of Domini Social
Investments (www.domini.com), the Calvert Group (www.calvertgroup.com), the As You
Sow Foundation (www.asyousow.org), the Center for Reflection, Education and Action(www.crea-inc.org), and the Interfaith Center on Corporate Responsibility (www.iccr.org).
Quality Assurance—A part of the Gap Inc. sourcing organization, the department thatworks with manufacturers to ensure products meet Gap Inc. expectations in terms of
construction, measurements and safety requirements.
Social Accountability International (SAI)—A US-based, non-profit organization
dedicated to the development, implementation and oversight of voluntary verifiable social
accountability standards. For more information, visit them at www.sa-intl.org.
Sourcing—The process by which Gap Inc. selects and places orders with manufacturers
around the world to produce the merchandise sold in its stores.
Stakeholders—Individuals and groups including NGOs, unions, governments, suppliers,
shareholders and employees who have a vested interest in the way companies conduct
their business.
Universal code of conduct—A unified code of vendor conduct used across an industry.
This is a goal of many multi-stakeholder groups.
Vendor Compliance Officer (VCO)—A member of Gap Inc.’s Global Compliancedepartment who monitors working conditions of manufacturers producing goods forthe company.

39

COMPANY OVERVIEW

Gap Inc. is a leading international specialty retailer offering clothing, accessories
and personal care products for men, women, children and babies under the Gap,
Banana Republic and Old Navy brand names. Gap Inc. operates about 3,000 storesin the United States, the United Kingdom, Canada, France, Japan and Germany.*
In the United States, customers also may shop the company’s online stores at
gap.com, BananaRepublic.com and oldnavy.com.

Gap Inc. Overview
Fiscal 2003 Highlights

Sales: $15.9 billion
Earnings: $1.0 billion, or $1.09 per share on a diluted basis
Employees: more than 150,000 at fiscal year-end

Social Responsibility Highlights

Social Investment Indexes: Gap Inc. is listed** on: Calvert Social Index, Domini 400 SocialSM
Index, Dow Jones Sustainability Index, FTSE4Good US 100 and FTSE4Good Global Indexes
Ethical Sourcing/Global Compliance• Merchandise produced by third-party garment manufacturers using approximately 3,000
garment factories in about 50 countries, including the United States• Garment manufacturers and factories required to undergo comprehensive Gap Inc. Codeof Vendor Conduct evaluation before being approved for production• More than 90 full-time Gap Inc. employees worldwide focused exclusively on monitoringand improving factory conditions, labor practices and compliance with company standards
Employee Volunteerism and Community Support• Gap Inc. employees volunteered 22,000 hours in 2003 through company programs• $60 million donated to non-profit organizations worldwide during the past five years,
in addition to $12 million in in-kind contributions in 2003 through the Gap Foundation
Environment• Stores built in 2003 are roughly 25% more energy efficient per square foot than those
opened in 2000, and almost 29% more efficient than those built in 1990
• Gap Inc. recycled 20,000 tons of cardboard and paper in 2003
• Member of U.S. Environmental Protection Agency’s Climate Leaders Program
Corporate Compliance and Governance• Nine of 13 members of Gap Inc.’s Board of Directors are independent directors• Board has specific oversight function for social responsibility through Board’s

For more information about Gap Inc.
and our social responsibility efforts
please visit us at gapinc.com.

Governance, Nominating and Social Responsibility Committee• Code of Business Conduct hotline to report concerns about Gap Inc. business practices:
866-Gap-Code in the U.S., Canada and Puerto Rico (toll-free); 770-582-5221 elsewhere(operator-assisted free call); email: corporate_compliance@gap.com**In January 2004, Gap Inc. announced that it will exit the German market in August 2004, closing 10 Gap store
locations, and focus resources on stronger international growth opportunities.
**As of April 13, 2004.

40

GAP INC. 2003 SOCIAL RESPONSIBILITY REPORTR6_GAP_SR_COVER 5/10/04 4:26 PM Page 2

GAP INC. GARMENT SOURCING BY REGION
AS OF 12/31/03
UNITED STATES & CANADAEUROPE (INCLUDING RUSSIA)

GREATER CHINAPERSIAN GULFNORTH ASIA

BELGIUM BULGARIAGERMANY MOLDOVAITALY ROMANIAPORTUGAL RUSSIASPAIN TURKEY
UNITED KINGDOM TURKMENISTAN“ This report contains a great deal of informationthat many companies have not provided publicly,
and includes valuable insights from a company
that we believe is sincerely struggling with thesecomplex issues.”

CANADA

CHINA

UNITED STATESHONG KONG
MACAU
SAIPAN/N. MARIANAS (US)BRAZILCOSTA RICA

COLOMBIADOMINICAN REPUBLICPERU

EL SALVADORTAIWAN (R.O.C.)

EGYPT
ISRAEL

BAHRAIN

JORDANOMAN

MOROCCOQATARTUNISIA

GUATEMALA

Public Reporting Working Group:

UNITED ARAB
EMIRATESHONDURAS

Adam Kanzer, Esq., Domini Social Investments LLC

MEXICOAlya Z. Kayal, Esq., Calvert Group Ltd.

NICARAGUAJAPAN
SOUTH KOREABANGLADESH
INDIA
NEPAL
PAKISTANSRI LANKA

Conrad MacKerron, As You Sow Foundation

BRUNEICAMBODIAINDONESIA

Ruth Rosenbaum, TC, Ph.D., CREA: Center for Reflection,
Education and Action, Inc.
David M. Schilling, Interfaith Center on Corporate Responsibility

KENYA

MALAYSIALESOTHO

PHILIPPINESMADAGASCARSINGAPORE

MAURITIUS

THAILAND

SOUTH AFRICA

VIETNAMFor the full text of the Public Reporting Working Group’s
statement regarding this report, please see Page 28.
MEXICO, CENTRAL AMERICA & THE CARIBBEAN

SOUTH AMERICANORTH AFRICA/MIDDLE EAST

SUB-SAHARAN AFRICA

INDIAN SUB-CONTINENT

SOUTHEAST ASIA

PRODUCTION OF THE REPORT
Because of some of the unique reporting challenges in the apparel retail industry, our first social responsibility report
does not follow established general reporting standards, such as the Global Reporting Initiative (GRI). However,
we have tried to cover key issues and areas important to our stakeholders. We will continue to evaluate reporting
standards such as the GRI, and will seek to incorporate relevant standards into future reporting.
For the production of this report, we selected an environmentally responsible printer that has a “zero landfill” policy,
recycles all process material waste and has an enclosed printing facility with negligible fugitive emissions.

Main cover photo: Xiuxia, 26, works in
the inspection department of a Gap Inc.approved garment factory in southern
China. The factory is one of approximately
241 Gap Inc.- approved facilities in China.

This report was printed in the U.S.A. on recycled paper.
Design: O&J Design, Inc.
Photography: Cover, Pages 2, 12, 13, 17, 24, 25 photos © 2004 Luis Ascui; Cover, Pages 2, 10, 11, 12, 17, 20, 21
photos © 2004 Sacha Dean Biyan; Cover, Pages 4, 13, 17, 26, 27 photos © 2004 Katarina Hesse; Pages 2, 6, 9, 38
portrait photos © 2004 Eric Millette; Cover, Pages 4, 12, 17, 22, 23 photos © 2004 Brent Stirton.
Printing: Lithographix, Inc.
© Gap Inc. 2004

R6_GAP_SR_COVER 5/10/04 8:12 PM Page 1

SOCIAL RESPONSIBILITY REPORTGAP INC. SOCIAL RESPONSIBILITY REPORT

GapBanana Republic
Old Navy

Two Folsom Street
San Francisco, CA 94105
gapinc.com