Improving Supply Chain Working Conditions

We partner with all of our branded-apparel suppliers and other key stakeholders—including peer companies, employees, unions, governments, multilateral institutions, NGOs, industry associations, investors and communities—to help provide safe, fair and healthy working conditions for the women and men who create our clothes. Using a holistic approach, we implement a variety of programs for monitoring facilities and building supplier capabilities to catalyze improvements in working conditions, taking country-specific approaches where appropriate. Our Human Rights Policy guides our programmatic response to develop a supply chain that is resilient, responsive and respectful of the workers who make our products.

Information on our response to COVID-19 impacts in our supply chain can be found here. 

We give our employees a chance to make a real difference in their communities through our Community Leaders program, which consists of nearly 2,700 people across seven countries. Our Community Leaders, the heart and soul of our volunteer efforts, are encouraged to identify a local nonprofit organization that can use the talents and skills of our employees. Our aim is to partner with these organizations to create long-term positive impact. This model gives our partners the confidence to invest in training our employee volunteers, and it fosters a deeper connection between our volunteers and the local community. Just as for any other business activity, each team is responsible for setting and delivering on their goals.

Our Approach

Consumer trends and expectations are placing greater demands on production timelines and capabilities—which can ultimately affect the individuals working in the garment industry.

Gap Inc. has worked to develop and implement a robust program for assessing and remediating issues in sourcing facilities, and in recent years has developed a suite of capability building programs focused on women’s empowerment, social dialogue and supervisory skills. Having field teams in our key sourcing countries enables us to partner closely with facilities and local stakeholders, allowing us to have thorough, on-the-ground insight into how our suppliers perform and what salient issues workers in our supply chain face. Given the need for industrywide collaboration, in some cases we partner with other brands to improve outcomes for garment workers.

Our goal is to design and implement industry-leading programs that can help drive innovation that transforms the apparel manufacturing sector. In partnership with our suppliers, NGOs, multilateral organizations and other stakeholders, we’re establishing initiatives that are multifaceted and focus on a range of interventions: improving worker and management relations, innovating how we assess and improve working conditions, and using technology to directly engage with and respond to workers’ needs.

THE SHORT STORY 
SUPPLIER SUSTAINABILITY  

• We work with peer companies, employees, governments, multilateral institutions, NGOs, industry associations, trade unions, investors and communities to forge innovative solutions to systemic issues.

• We have consolidated our supplier base by 25% so that we can work more closely with fewer suppliers.

• We have built a holistic sustainability team so that all of our field staff can support progress with suppliers.

Since launching our Supplier Sustainability program in 1994, we have transformed our approach to improving facility working conditions by developing innovative, holistic programs that go far beyond assessing and remediating issues in our approved facilities. Today, Our Supplier Sustainability program combines two important elements: 

Assessment and Remediation: Our approach to improving working conditions is based on transparency, partnership and impact. We believe that by working together, we can achieve our commitments to improve workers’ well-being, protect human rights, reduce environmental impacts and improve business performance.

Capability Building: In partnership with our suppliers, we developed a suite of programs that aim to develop facilities’ capabilities for worker representation and leadership involvement. Initiatives such as our Workplace Cooperation Program and Workforce Engagement Program—which we developed with Better Work and Verité, respectively—focus on maturing industrial relations in facilities and providing functioning grievance mechanisms while also measuring and improving the degree to which garment workers feel valued and engaged at work. Our life-skills program, P.A.C.E., gives women training and support to advance in their professional and personal lives. In addition to our cornerstone programs, we manage or participate in a broad set of initiatives that address country-specific labor issues. 

Our Supplier Sustainability efforts historically have focused on issues at cut-and-sew facilities where we have direct relationships and greater influence to drive improvements. We also monitor, assess, remediate and disclose their supporting facilities, such as laundries, embroideries and screen printers. However, in recent years we have evolved our strategy to address issues in other parts of our supply chain, including areas where we have less direct influence but nonetheless see opportunities to improve working conditions. 

Achieving our goals requires innovation and closer partnership with suppliers and their facilities that manufacture our branded product. At the same time, more assistance, better tools and added capability building services are provided to suppliers to help them improve their sustainability performance. One of our responsibilities in a partnership model is to clearly establish and communicate all of our expectations to our supply chain partners. To that end, we have evolved our Code of Vendor Conduct (COVC) to provide our supply chain partners with more clarity on our standards, goals and expectations. 

The COVC is reviewed on an annual basis to reflect best practices. It is incorporated into our Vendor Compliance Agreement, which is a legally binding agreement signed by all our manufacturers and is a condition of doing business with Gap Inc. We request supplier and worker feedback and partnership along the way, and expect continuous improvement from ourselves, and our supplier partners. Our COVC Supplier Manual is a comprehensive manual that provides guidance and insight into how facilities can meet the standards outlined in our COVC. This COVC Supplier Manual is made available to all suppliers. While assessing facilities’ performance against our COVC is a significant aspect of our work, we are also a consultative resource and strive to help our suppliers prevent and solve problems as well as innovate to identify new solutions.

Our Global Supply Chain and Supplier Sustainability teams work in about 30 countries and we often tailor our practices in these places based on a deep understanding of the local context. In addition to our Assessment and Remediation program (described below), which we maintain for every supplier and facility wherever we source our branded clothes, we have created unique programs and specific policies to address local economic, political, business and cultural context where needed. These assessments include social, political and environmental data, along with risk indices and expert analysis. They also draw on the insights we have gathered through ongoing engagement with a variety of external stakeholders and business partners.

Assessment and Remediation

The success of each assessment depends largely on the willingness of the facility management to provide access to a facility’s grounds, records and workers. We believe that transparency is crucial for the long-term health of our business relationships and ask that all our vendors and facilities embrace this as a core aspect of our partnership. Our focus is on assessing sustainability performance and helping to identify areas for improvement, which can only be done if we understand the true working conditions and environmental impacts in the facility. 

We primarily evaluate facilities through our own field teams’ assessments and our partnership with the International Labour Organization’s Better Work Program in countries where it operates. Our global field team is located primarily in the countries from which we source, giving us a direct, on-the-ground understanding of worker needs and facility performance. Our global field team is located primarily in the countries from which we source, giving us a direct, on-the-ground understanding of worker needs and facility performance. We also support the adoption and institutionalization of new industrywide tools, such as the Social & Labor Convergence Program (SLCP) to help assess factory performance. 

We recognize that every country and every facility is different and so our assessment team is trained to assess facilities according to the local environment. Facility management is expected to provide their full support and access for the assessors to carry out all assessment activities. Facilities shall allow Gap Inc. representatives or agents unrestricted access to its facilities for observation, workers for interview and relevant records for review, whether or not notice is provided in advance. Any form of restriction during our assessments will be considered a critical COVC violation and will negatively impact facility’s rating, and may lead up to termination of our business relationship.

Our Supplier Sustainability Assessment Manual, which is based on industry best practices, outlines the protocols our team uses to assess and remediate issues related to labor or working conditions. Each fiscal year, our team conducts a full assessment for all active manufacturers of our branded product to understand working and labor conditions, facilitate greater partnership with our suppliers and improve sustainability performance. Each assessment includes interviews with managers, confidential interviews with workers, visual observations and reviews of documents and records.

We conduct announced, unannounced and semi-announced assessments. Depending on a multitude of factors, including transparency, commitment to continuous improvement and a proven ability to effectively and sustainability remediate issues, notification of assessments will vary. Roughly 50% of our assessments are unannounced. 

SUPPLIER SUSTAINABILITY 
GOALS 

• Achieve a sustainability rating of green or yellow for all Tier 1 suppliers by 2020 

• All Tier 1 suppliers tradition from cash-based payments to digital payments by 2020 

• Implement our Workplace Cooperation Program in 200 facilities by 2020 

• 100% of Gap Inc Tier 1 suppliers are investing in work engagement and well-being initiatives by 2020

Our assessments can be classified as one of the following types, and are further detailed below:

Initial Assessment: The first full assessment carried out for a facility that has been offered for assessment and approval. 

Full Assessment: Assessments that cover all sections of Gap Inc. COVC. We aim to conduct at least one Full Assessment is conducted for all active, approved facilities each fiscal year (February 1st to January 31st), unless otherwise specified for certain categories. 

Follow-up Assessment: Assessments carried out to assess the progress made by facilities on the issues identified during the Initial Assessment or Full Assessment. New issues may also be found during follow-up assessments and those are also recorded and reported. 

When we assess a facility, they receive a rating that is calculated based on clear criteria within five categories: Compliance with Laws, Environment, Labor Standards, Occupational Health and Safety, and Management Systems. We employ a facility rating system that offers gradients of non-compliance that correspond to different severity levels. Violations are input into a system that categorizes findings by their level of severity: “critical,” “severe,” “key” and “noncompliant.”

We use a color-coded system to rate facilities’ performance based on assessments.  High-performing facilities with no critical or few violations receive a green rating. Average performers are rated yellow, while facilities that need improvement on one or more serious issues are assigned a red rating. Critical, severe and key violations have a greater negative impact on a facilities’ rating than “non-compliance” violations, such as first-aid kits not being fully stocked.

Issue Remediation

Issue Remediation: When a serious issue or allegation impacting worker rights is surfaced to Gap Inc., via a company grievance channel, audit, external stakeholder or other reporting mechanism, the issue is generally reviewed within 3 business days. Once a request has been received, our local Supplier Sustainability team assesses the risk to determine the responsible party or parties for conducting further investigations, and due diligence. In addition, we have the facility immediately stop all actions related to the alleged violation.

Processing of surfaced issues with direct impact on worker rights starts immediately but may take up to 1 week depending on complexity, during which the relevant parties, including our internal business, will be notified of the issue’s status and immediate next steps. Our Supplier Sustainability team works with the complainant(s), the facility, local stakeholder groups and with other brands sourcing from the same facility to conduct a detailed root cause analysis and assesses facility management systems. This analysis informs our determination of the appropriate course of action and accounts for the security and safety of the worker. 

When the issue is a violation of our Code of Vendor Conduct (COVC) or a breach our Human Rights Policy, the parties are informed of the results of any investigation and Corrective Action plans are developed that include follow up with management and on any additional remedial actions taken. Gap Inc. considers the grievance or complaint resolved when the issue has been resolved and Gap Inc. has determined through its Assessment and Remediation framework that the appropriate remedy has been provided in accordance with our COVC and Human Rights Policy expectations

Issue Clarification and Performance Measurement: A key tenet of our approach to partnering with facilities is that we work to fix what we find. Together with facility management, we agree on specific, time-bound corrective action plans to address findings, and we provide additional resources to fix the issues that pose higher risks to workers’ rights and well-being, as well as to our business. Based on the severity of issue, we outline a timeline within which we expect the facility to fully remediate. To ensure sustainable resolutions of issues, facilities are encouraged to conduct root cause analysis of issues and to present corrective actions that address the root causes. Some issues may require multiple progressive corrective actions for resolution. In such case, each corrective action shall have a target completion date. We also collaborate with local stakeholders who have direct access and influence to improve conditions. 

The Corrective Action Plan submitted by each facility must include the following information:

1. A plan to address findings which are noted in the Assessment Report from Gap Inc.

2. Specific Corrective Actions to eliminate the cause of finding. This could include developing or updating written policies or procedures, capability building and any other relevant actions.

3. If Root Cause Analysis has been conducted, Corrective Actions should target the root cause(s) identified.

4. Information on who is accountable for each Corrective Action implementation at the facility.

5. A deadline for completing each Corrective Action.

The Gap Inc. assessor will follow up with the facility on the Corrective Action Plan according to the timeline set by the facility. The facility is responsible for sending to the Gap Inc. Supplier Sustainability Specialist evidence of corrective actions taken as per the timelines for each issue reported in the assessment report. The assessor will review the evidence submitted and update the facility whether the issue can be resolved by offsite review of evidences, or if an on-site verification is required.

We monitor progress through follow-up assessments. Should there be outstanding or overdue issues, our Supplier Sustainability and Global Supply Chain teams escalate further intervention. However, if critical or severe issues remain unresolved, we may halt future order placement or discontinue the supplier relationship.

Our Assessments

Initial Assessment: When there is a request to work with a new supplier, Supplier Sustainability Specialists conduct an initial on-site assessment of the requested facility. Upon review of the facility assessment report, Global Sustainability will notify the vendor and Gap Inc. supply chain representative of one of the following decisions:

→ Corrective Action Needed

→ Approved

→ Rejected

If Global Sustainability informs a vendor that corrective action is needed before a facility can be approved, the facility may be given the opportunity to take appropriate steps to gain approval. Global Sustainability must determine that all corrective actions have been satisfactorily taken, or identified non-compliance issues have been satisfactorily resolved before a facility can be approved for production.

An approved facility will be authorized to begin production only after a written approval letter is issued by the Global Sustainability department upon successful completion of the approval process which may include other processes such as technical approval or Gap Inc. Water Quality Program (WQP) approval. Rejected facilities are not authorized to produce for Gap Inc., and the rejected facility cannot re-apply with an approval request within 12 months from the date of rejection.

On-Site Assessment: During each assessment, information is gathered from management interviews, confidential worker interviews, visual observation, and documents/records reviews based on a minimum sampling. The size of Gap Inc.’s assessment team will depend on several factors.

A full assessment can require 1-4 person days, depending on the number of workers employed by the facility. For smaller factories, our assessors may conduct confidential interviews with 5-15 individual workers, while also interviewing groups and management. For a larger facility, we may conduct as many as 30-50 individual worker interviews, both onsite and offsite. Workers are selected for interviews based on facility demographics, such as gender, to ensure inclusive representation. During the assessment, the team will assess facility expectations, working conditions and examine worker files for compliance, completeness and accuracy, as well as time and wage records.  

2019 Progress

In 2017, Gap Inc. set a goal to not work with any red-rated facilities by 2020. We have made significant strides toward this goal, moving from 16 percent red-rated facilities in 2016 to less than 2 percent by the end of fiscal 2018. We maintained that percentage of red-rated facilities in 2019.  

By integrating this work more deeply into our sourcing decisions and concentrating our business with preferred vendors, we were able to increase our investment to help facilities close out COVC violations in a sustainable, responsible way. In addition to a dedicated Supplier Sustainability team that engages directly with facilities on these issues and targets, we train global sourcing employees on human rights policies and procedures, building companywide awareness on COVC requirements, and collaborating internally to manage vendor performance and drive sustained performance. Through training and education, we also work closely with key vendors to build their capacity for continuous improvement and help them implement proactive measures that will prevent COVC issues from arising in the first place. 

In 2020, we will work toward our goal of zero red-rated facilities by continuing to build on our established management practices, including our work with our supply-chain partners, which has helped us progress over the years. We create realistic corrective action plans to help red-rated facilities resolve their challenges and improve in a timely manner. We have learned that setting big goals and having the management systems to provide visibility and accountability leads to sustained improvement. We will continue to provide that visibility through tools such as integrated scorecards that prioritize sustainability and business performance.  

While we didn’t reduce the percentage of red-rated facilities in 2019, the number of green-rated facilities increased by 6 percentage points between 2018 and 2019. Our analysis shows that the majority of these green-rated facilities are our more established vendors, and a good percentage of them also participate in our capability-building programs, including our Workplace Cooperation Program and P.A.C.E. 

In 2019, an independent study by the University of Oxford and the University of Toronto confirmed that our approach of aligning sourcing decisions and accountability with social-compliance goals is an effective model to improve supplier performance against our COVC criteria. The study authors indicated that the improvement in performance under this aligned approach appears to be greater than when supplier sustainability and purchasing operate independently. 

Issue Resolution Results

We closed 82 percent of issues within 12 months, for ones that were open as of February 1, 2019.

Resolution of Factory Code of Vendor Conduct Issues Open as of 2/1/2019