How Gap Manages Social Compliance

How Gap Manages Social Compliance
It's been 10 years since Gap Inc. established its vendor code of conduct and global compliance team. Since then, the retailer has embraced a more collaborative approach and leveraged systems to a greater extent to measure vendor performance.

Gap Inc. doesn't just pay lip service to being a responsible corporate citizen. Rather, the company strives to incorporate socially responsible practices into all operational facets - from improving factory conditions, to investing in communities, to caring for the environment.
Founded in 1969, the San Francisco-based company operates five brands - Gap, Banana Republic, Old Navy, Forth & Towne and Piperlime - with more than 3,100 stores sprinkled from the United States to Japan.

The products sold at these stores are made in garment factories around the world, many located in countries where labor standards are lax. Dan Henkle spearheads the charge to make each garment factory a safe and fair place to work. As Gap's senior vice president of social responsibility, Henkle leads a team of more than 90 employees worldwide dedicated to improving conditions in garment factories and the communities in which they operate.

Apparel spoke with Henkle about Gap's social compliance programs, how garment factories are selected, the role that technology plays in its strategy and how industry-wide collaboration is making inroads toward improving factory conditions overseas.

Q. What is the genesis of Gap's social compliance programs?
A. Back in 1992 we developed sourcing guidelines for our suppliers to guide their decision making on working conditions and labor issues. What we found over the years was that putting guidelines in front of our suppliers wasn't enough - we needed to not only have guidelines, but we needed to have enforcement of those guidelines. So in 1996, we established our code of vendor conduct and our global compliance team, which allowed us to really check to see if suppliers that had committed to complying with our code of conduct were actually doing it. We had felt for a very long time that we wanted our suppliers to manage their business in an ethical and responsible way. Over the years, we've found ways to be more effective in getting the kind of results that we're looking for.4

Q. How have the programs evolved over the years?
A. We have found that it's very important to be connected to local stakeholders whether it be NGOs, trade unions or other organizations. We're not in the factories 365 days a year, so it's really helpful to have relationships with local stakeholders. Another evolution has been getting our vendors and suppliers to a place where they're truly owning their own working conditions. We don't want to be in a situation where suppliers are just waiting for us to come in and find all of the things that they're doing wrong; we'd rather be in a situation where they're monitoring their own operations, and they're fixing problems before we ever get there.

Q. What steps are taken to ensure factory compliance?
A. My team monitors factories before production can be placed. We have the ability to turn on approval for a factory, and we can also turn off approval for a factory. What this means is if I'm in the production organization here, and I want to use a factory, [I] can only use it if it's been approved by my team. This allows us to stay out of factories that are not going to be able to meet our standards. We think it's a mistake to go ahead and put production into these factories and then have to pull production out because things aren't working. We prefer to vet the factory before we place production. On top of the pre-approval process, we monitor the factories on an ongoing basis. We try to get to all of our suppliers at least once a year. Our average last year was just over two visits per factory.

Q. How does the company leverage technology as part of the social compliance strategy?
A. Shortly after we established our team in 1996, we put in a system to track the audit data that we were finding in the factories. We can also use this system to rate our factories from a level of one to five, with Level 1 being the lowest. This is extraordinarily important when we're trying to make decisions about production allocation because we can convey the information to our internal business partners in sourcing and production. If you're making a decision between a factory that's a Level 4 in compliance vs. a Level 2, and they can both do similar things, why wouldn't you just take the Level 4 factory?

Q. How does Gap ensure that social compliance is an active part of its corporate culture?
A. We've set up something we're calling the "Sourcing Counsel," which consists of various groups internally that touch sourcing in some way, shape or form. Each organization puts issues on the table that they're facing challenges with, and then there is group decision making. By getting people involved in the solving of a problem, we've found that we're able to implement solutions that work for what we stand for as a company. Also, we have recently developed what we're calling an "integrated vendor scorecard,"which goes beyond just looking at social responsibility ratings, [and] also rates top vendors on factors such as quality, speed and innovation. It's been important to put this kind of information into a format that is very accessible to people internally. The easier we can make this data to access, the better our decision-making is going to be.

Q. In retrospect, are there any aspects of the social compliance programs that haven't worked so well?
AThe reality is that when you're trying to address issues that are very, very complex, and you try to do the work on your own, you're not going to be as effective. Our biggest learning is that we've become more effective by working collaboratively and trying to bring the best thinking to the table to address these complex issues. Probably the most fundamental shift we've made over the past five or so years is moving from trying to develop a lot of systems on our own to trying to develop systems collectively. It may take a little more time, but when you implement these programs and solutions, they are more likely to be sustainable in the long term.

Q. In the future, do you believe that there will be industry-wide collaboration to improve working conditions at factories overseas?
A. It's already happening in a variety of different venues. You have country-level buyer groups where different brands operating in a particular country are getting together to address common issues. You have multi-stakeholder organizations like the Ethical Trading Initiative, Social Accountability International and the MFA Forum, who are bringing groups together to try and tackle issues collectively rather than as individual stakeholders. Also, the Joint Initiative in Turkey is bringing together six multi-stakeholder groups to try and develop a universal code of conduct and a universal system of monitoring. There is absolutely a drive toward more universal systems, and I think it's just a matter of time. We believe we're more effective in this work when we're working together. It's been borne out that anything we do on our own can be magnified by working with others. n

Chelan David is a Seattle-based free-lance writer.