Driving Business Integration

Driving Business Integration A shift in our approach to drive deeper, more widespread change

For more than two decades, our team of specialists has strived to improve working conditions for the people who make our clothes. While we have made significant progress, we also realize that we have to go further. To create lasting, wide-scale change, our sourcing team and brands also need to play active roles. By doing so, they are enabling us to integrate sustainability more deeply into our business, a key stage in our strategy to create greater impact. 

Driving business integration with factories and suppliers

To create lasting, wide-scale change, our sourcing team and brands need to play active parts in our sustainability efforts.

Strategic suppliers

These teams are finding new ways to collaborate every day, including the setting of shared sustainability goals. They are also taking an integrated approach to measuring the performance of our suppliers across all dimensions that are important to us, from working conditions to environmental performance. 

To support this work, we created a sustainability forum at Gap Inc. that brought together some of our most senior leaders across the company to explore new ways of collaborating. The forum established a new way of working across our teams – from infrequent, formal gatherings to day-to-day partnership across a wide variety of issues. We’re now exploring how to take this collaboration to the next level, including joint ownership of long-term, ambitious goals that are approved and owned by leaders throughout the business. 

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

  • 100 percent adherence to updated unauthorized subcontracting (UAS) policy 
  • Closing of 90 percent of critical issues and 50 percent of other open issues at 181 low-performing red factories
  • Development of complementary 3-year plans for both teams for 2015-2017

Focusing on Strategic Suppliers

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

Our approach includes creating a Supplier Leadership Program to support and reward suppliers who meet our business and sustainability goals. The program will provide training and incentives to suppliers that meet targets for improved social, environmental and product performance. Over time, we believe that suppliers and factories that take ownership of their sustainability programs will realize business benefits and thereby need fewer external assessments and incentives.

Building closer relationships with preferred suppliers plays a key role in embedding sustainability into our sourcing practices.

Results

We sourced 52 percent of the unit volume of our branded clothing from factories of preferred suppliers in our top three sourcing regions as of the end of fiscal 2014. The corresponding figure for factories of all preferred suppliers of our branded clothing was 56 percent of unit volume. We plan to use these figures as a baseline for tracking our share of sourcing from preferred suppliers going forward.

Our increasing focus on a smaller set of preferred suppliers is also reflected in a 14 percent reduction in the number of assessed factories that supplied our brands from 2011-2014.

Assessed Factories Supplying Branded Apparel to Gap Inc.

  2011 2012 2013 2014 % Change
2011-14 
Region # of
factories
% of
factories
# of
factories
% of
factories
% of
factories
% of
factories
% of
factories
% of
factories
Top 3 Sourcing
Regions
984 78% 955 81% 952 83% 968 89% -2%
Top 3 Sourcing
Regions
1255   1178   1152   1083   -14%

Eliminating Unauthorized Subcontracting (UAS)

While subcontracting is a common practice in the apparel industry, engaged in by suppliers to manage production capacity and fulfill large orders, it can pose a risk to our reputation and the well-being of the people who make our clothes. Unauthorized sub-contracting is problematic because suppliers may outsource production to facilities that we have not approved and that do not uphold our requirements for safe, fair labor practices and working conditions. 

Expanding the collaboration between our sustainability and sourcing teams can help us address UAS issues since incidents can be difficult to detect through the periodic factory assessments conducted by our sustainability field team. We take extra precautionary measures in countries with high risk of UAS, such as specialized training for suppliers and factory management.  

We created a sustainability forum that brought together some of our most senior leaders across the company to explore new ways of collaborating. 

Eliminating unauthorized subcontracting

If we encounter a UAS case, our field team promptly implements our Issue Escalation Policy for High Risk Incidents, which calls for:

  • Requiring the factory to immediately stop production
  • Ensuring all goods (finished or unfinished) are returned to a factory approved by Gap Inc., segregated and held until the issue is resolved
  • Leading an investigation to look for and address any critical issues
  • Requiring the factory to register for management system training

 

Results

We resolved 100 percent of 35 UAS cases we identified during 2013-2014. To drive more accountability, we began imposing charge-backs fines for UAS violations in 2014, the proceeds of which were applied to fund collaborative initiatives to improve long-term social and environmental performance at apparel factories, including the Project on Sustainable Labor Practices in Global Supply Chains and Better Work’s Workplace Cooperation Program. Learn more in the section on Building New Collaborations.