US retail giant Gap Inc is trying to manage its clothing supply chain so that factories aren't overwhelmed with last-minute orders or changes to production plans which can lead to illegal subcontracting and vastly increased overtime for workers, according to its latest Social Responsibility report.
 
The company has also pledged to include sustainable/recycled materials in product packaging for its brands by 2010 as part of its ongoing 'ECO' strategy.

The San Francisco-based company, which owns the Gap, Old Navy and Banana Republic chains, is using its latest report, covering fiscal years 2005-2006, to outline progress and goals across its supply chain, community investment, employees and the environment.

"We're making a lot of changes at Gap Inc but, as our Social Responsibility Report demonstrates, doing business the right way is still extremely important to us," said Robert Fisher, former interim CEO and current member of Gap Inc's board of directors.

Gap said yesterday (16 August) that 61% of its contracted garment factories are currently rated 'Good' or 'Excellent,' as progress is being made to improve the working conditions at many factories in its supply chain.

But it acknowledged that more factories in India fell into the Level 1 category of "urgent attention required" than before.

It believes this is due, in part, "to the fact that the region experienced a sudden increase in production and suppliers did not have the capacity to handle the increased workload."

Across its supply chain, a team of more than 90 people conducted 4,316 inspections in 2,053, or 99.4%, of the garment factories the retailer sources from.

Since 2006, the company has also partnered with Women Working Worldwide (WWW) as part of an ongoing initiative to ensure that its production planners and merchants understand the impact their decisions can have on factory working conditions.

On the environmental front, Gap's 'ECO' strategy focuses on three key areas: Energy conservation; Cotton/sustainable design; and Output/waste reduction.

Between 2003 and 2006, the company decreased energy use in US stores by 8.7% and increased its paper and cardboard recycling in North American stores, distribution centres and headquarters by more than 90%.

And this year, Gap brand introduced new products in its stores in the US, UK, Canada and France made from 100% organic cotton.

"Each section of the report explains our progress in key areas and raises new challenges we've identified through our experiences," said Dan Henkle, senior vice president of Social Responsibility, Gap Inc. "We believe that our transparency will encourage other companies to take similar actions."

Kevin Thomas, a spokesman for the Toronto, Canada based labour rights group Maquila Solidarity Network, agrees.

He told just-style that Gap should be commended for its "willingness to engage with trade unions and NGOs and governments and to disclose a fair bit of information about what they're doing to address the issues.

"They're doing a good job of acknowledging the problems and saying 'here's what we're willing do in the short term to tackle them'."

Particularly positive are the company's readiness to engage with key international trade unions on the issue of freedom of association, and the disclosure of "a fair bit of information" about what it's doing.

However, he still believes there is room for improvement, particularly on the disclosure of factory locations and the issue of wages.

"In a review of public reporting last December we ranked about 30 different apparel companies to see how open they were on these issues. Gap came in fourth out of the 30 companies, after Reebok, Adidas and a Canadian company called Mountain Equipment Co-op.

"One of the areas they didn't do so well was on the issue of code of conduct because they didn't address things like a living wage."

He says the company could also improve on the issue of purchasing practices. "They've got to show they're willing to investigate their own practices and that they're in line with their own values."

Thomas believes it is encouraging that Gap's report points to a review of its code of conduct, the standards set for suppliers, to be more in line with the Ethical Trading Initiative code to which it belongs.

"Our hope is that they will get in line with that code which includes things like a living wage. But that's still in the works."

Gap Inc is currently in the midst of streamlining its operations in a bid to turnaround disappointing same-store sales figures, but former interim CEO Robert Fisher believes its social responsibility program is "good for business and we know it's the right thing to do."

But the positive benefits are slow to show on the retailer's bottom line. Its first quarter earnings fell 26.4% to US$178m, and same store sales in July slipped 7%. Last month it ended a seven-month search by hiring Glenn Murphy, the former CEO of Canada's largest drug store chain, Shoppers Drug Mart, as its chairman and chief executive officer.

Gap now says it intends to report on its social responsibility efforts every two years, with the next report due for release in 2009.

The full Gap Inc 2005-2006 Social Responsibility Report is available online

By Leonie Barrie.