Partnering with Factories

Partnering with Factories Improving working conditions to benefit people and our business

We know that even more than our policies and ideas for improving working conditions, what really matters is how we put them into practice. Each day, we strive to take actions that will lead to improvements – not just in the short term, but through the creation of long-term sustainable change. More than 20 years into our journey, we are challenging ourselves to continue to innovate, address challenges in a holistic way and rigorously assess our progress so that we can identify new opportunities for creating change.

Partnering with factories

We have thoroughly reassessed our approach to working with factories, laying the groundwork
for further progress.

Three core elements guide our approach:

  • Assessing and fixing issues (“Assessment & Remediation”) – We help factories meet legal and international standards for labor practices and working conditions and support their efforts to fix any issues that we find
  • Strengthening factories’ capabilities (“Capability Building”) – We help suppliers take ownership of their own sustainability by providing training and guidance designed to empower them to improve management practices, give voice to their employees and internalize standards
  • Building on the power of our connections – When factory employees are treated fairly and work in safe conditions, they help us create better products and enhance factory productivity and performance. These mutual benefits lay the foundation for sustainable change. 
Partnering with Factories At A Glance

We strive to become more effective at identifying and correcting issues, which can be hard to detect, even for a well-trained and experienced eye. 

In the past few years, we have conducted a thorough reassessment of our approach to working with suppliers, laying the groundwork for further progress and deeper partnership. We have consolidated our supplier base to focus our resources on suppliers that have the greatest alignment with our goals.  We have introduced a range of improvements as well as innovative programs to better understand the experience of the people who make our products and make sure that their voices are heard. Investments and changes that we are currently implementing include:

  • Increasing transparency into where our products are made:
    • In September 2016, we disclosed the names and locations of factories that manufacture our branded products. This list will be updated on a biannual basis and as needed.  The factory list can be found here.
    • In addition to publishing a list of factories, we recognize that our suppliers have the potential to benefit from a greater understanding of how we measure their sustainability performance. With that in mind, we are providing suppliers with increased access to data and analysis from our Assessment and Remediation program, to further enable them to make investments in their employees and their business operations. Over time, we will also provide information on each supplier’s involvement in various Gap Inc. programs.
  • Tailoring assessments to factory circumstances and needs:
    • By segmenting our factory base, we plan to allocate additional resources to factories with more workers and greater complexity
  • Introducing revisions to our Code of Vendor Conduct (COVC) requirements, through the creation of Gap Inc.’s COVC Manual and a revised Assessment Manual for our supplier sustainability team:
    • Our COVC manual is the primary training resource that helps our suppliers understand how to meet our sustainability requirements. This document outlines our expectations with regard to labor standards, working conditions and the environment, among other issue categories, and allows them to proactively address any issues
    • Our Supplier Sustainability Assessment Manual, which is based on industry best practices, outlines the protocols our team uses to assess and remediate any COVC compliance issues at factories
  • Incorporating the use of mobile technology to engage and empower the workers who make our branded clothing by:
    • Collecting intelligence on factory practices and issues and providing a grievance mechanism for workers to express any concerns
    • Improving our capability building programs by measuring their impacts on workers, as well as factory practices and conditions
    • Delivering information can help increase workers’ knowledge, productivity and happiness
Factory partnerships to improve working conditions

We continue to work in close partnership with the International Labour Organization, sitting on its advisory board and piloting Better Work programs in new countries.

Assessing & Approving Factories

Our Code of Vendor Conduct lays out our standards for working conditions at the factories that make our products, and we invest significant resources in its enforcement. We continually strive to become more effective at identifying and correcting issues, which can be hard to detect, even for a well-trained and experienced eye. In addition, new issues often arise after others have been fixed. While we do not own any of the factories that manufacture our branded clothing, we recognize the responsibility to help ensure that factories uphold our social and environmental standards.

 

Results

  • We assessed labor practices and working conditions at 97.4 percent and 99.6 percent of the active factories that supplied our branded clothing in 2013 and 2014.
  • Of our factory assessments in 2013 and 2014, 52 and 53 percent were unannounced in 2013 and 2014.

Better Work Program

We evaluated 240 and 163 new factories in 2013 and 2014. One of our most significant collaborations over the past 15 years has been the Better Work (BW) program. Led by the International Labour Organization (ILO), BW is a multi-stakeholder collaboration that creates a joint approach to monitoring factories. In 2001, we helped form Better Factories Cambodia, which later expanded into BW. And we continue to work in close partnership with the ILO, sitting on its advisory board and piloting BW in new countries, including Bangladesh.

The program focuses on protecting worker rights and well-being by helping companies and governments uphold the ILO’s core labor standards and national labor laws. It leads factory assessments and helps address and remediate issues in BW countries. We also partner with and support the ILO on initiatives and programs in some countries where we conduct our own factory assessments or use third-party assessors, including Myanmar.  

Read more about our partnership with Better Work in the section on Designing Country Strategies.

Results

BW assessed 128 – or 44 percent – of the factories that make our branded clothing in BW markets in 2014, including 77 percent of factories in Cambodia.

In Vietnam, BW conducted 36 percent of assessments and Gap Inc.’s field team performed 64 percent. We registered five out of 50 factories in northern Vietnam in 2014 due to BW's recent expansion. In southern Vietnam, 32 out of 52 factories participated in the BW program.

In Indonesia, BW performed 24 percent of assessments, while Gap Inc.'s field team conducted 76 percent. BW Indonesia has had limited staff and mostly operates in the greater Jakarta area and a few other cities in West Java. The program is voluntary and enrollment is based on the discretion of factory management.

Factory Assessment & Remediation in Better Work Markets (2014)

  Factories Audited by Better Work Factories Audited By Gap Inc.  
Country # of factories % of factories # of factories % of factories Total
Cambodia 51 77% 15 23% 66
Haiti 4 100% 0 0% 4
Indonesia 21 24% 66 76% 87
Jordan 5 100% 0 0% 5
Lesotho 2 100% 0 0% 2
Nicaragua 2 50% 2 50% 4
Vietnam 43 36% 78 64% 121
Total 128 44% 161 56% 289

Factory ratings help us gauge progress in improving working conditions and play a crucial role in integrating sustainability more deeply into our business.

Factory Ratings

Factory ratings help us gauge progress in improving working conditions – and they also play a crucial role in integrating this work more deeply into our business. Ultimately, we aim to use ratings as an input into our sourcing decisions, similarly to how we rate factories based on the quality and cost of their product. For this reason, we continually work to improve our approach to ratings. In the past few years, for example, we began looking more closely at the severity of specific issues such as overtime, so that we can better assess where to focus our resources.

Our ratings also provide the framework for other critical aspects of this work. They help to establish targets for factory performance on labor practices and working conditions, facilitate dialogue with managers and support our ability to work with factories to create continuous improvement.

We use a color-coded system to rate factories’ performance. High-performing factories with no or few key violations receive a dark or light green rating. Average performers are rated yellow, while factories that need improvement on one or more serious issues are assigned a red rating. Key violations, such as excessive hours, have greater negative impact on a factory’s rating than “non-key” violations, such as first-aid kits not being fully stocked.

Results

Overall, the share of high-performing dark green-rated factories decreased, while the share of yellow- and red-rated factories increased somewhat during 2010-2014. This finding spurred us to investigate further and take steps to reverse this trend. For the first time in 2014, our sustainability and sourcing teams came together to set – and achieve – a shared goal to address issues at red-rated factories. We succeeded in resolving 96 percent of critical issues and 81 percent of other open issues at all low-performing factories in this category.

In addition, we are continuing to invest in new programs such as our work with Verité, and we have evolved our rating methodology to more accurately assess factory performance and focus our time on the most critical issues. By the end of 2020, we have set a goal to have no red-rated strategic suppliers of branded apparel.

Overall Factory Ratings for Suppliers of Branded Clothing

All Regions 2011 2012 2013 2014
Dark Green 15.9% 16.1% 13.4% 12.2%
Light Green 34.2% 36.1% 32.6% 32.9%
Yellow 34.3% 34.7% 39.0% 36.2%
Red 15.6% 13.1% 15.0% 18.7%
# of factories assessed 1255 1219 1152 1107

Three regions – Greater China, South Asia and Southeast Asia – accounted for 89 percent of the unit volume of branded clothing sourced from suppliers in 2014.

Factory Ratings for Top 3 Sourcing and Other Regions

Greater China 2011 2012 2013 2014
Dark Green 14.1% 10.8% 9.4% 8.1%
Light Green 31.0% 34.4% 33.4% 36.0%
Yellow 35.6% 32.4% 39.8% 34.4%
Red 19.3% 22.4% 17.3% 21.4%
# of factories assessed 326 343 329 308
South Asia 2011 2012 2013 2014
Dark Green 8.6% 8.7% 8.5% 6.6%
Light Green 31.6% 35.2% 33.4% 31.1%
Yellow 41.3% 47.9% 46.1% 44.0%
Red 18.6% 8.1% 12.0% 18.2%
# of factories assessed 361 332 317 302
Southeast Asia 2011 2012 2013 2014
Dark Green 17.5% 14.6% 9.8% 8.2%
Light Green 39.7% 42.4% 31.4% 27.8%
Yellow 30.3% 30.2% 38.9% 41.4%
Red 12.5% 12.9% 19.9% 22.7%
# of factories assessed 297 295 306 331
Other Regions 2011 2012 2013 2014
Dark Green 25.8% 36.9% 33.0% 38.0%
Light Green 35.4% 31.3% 32.0% 40.4%
Yellow 28.0% 24.9% 26.5% 15.1%
Red 10.7% 6.8% 8.5% 6.6%
# of factories assessed 271 249 200 166

Our factory ratings reflect the following circumstances in several of our key sourcing countries.

  • Worker strikes or “hartals” in Bangladesh reduced working days and led to more overtime hours. The increase in red factories in Bangladesh over the past several years reflects an evolution in our methodology -- as we refine what we are looking for, we expect to find more issues. In addition, as the country's garment industry continues to evolve, new issues surface even as others are addressed. We view red factories as a priority and the visibility they afford as a key tool in working to create a stronger and safer garment industry in Bangladesh.
  • Labor shortages in Cambodia and Vietnam contributed to overtime issues.
  • Vietnam instituted a new labor law in March 2013 that led to an increase in issues identified in late 2013 and 2014.
  • Our sourcing needs called for greater use of supporting factories for printing, embroidery and laundry, which tend to have more issues than other factories.
  • Most of the factories we have registered in Better Work assessments are more resource-intensive and tend to identify more issues, which contributes to lower ratings. 

More data on factory ratings and compliance with Gap Inc.'s Code of Vendor Conduct available in Data Tables.

Helping Fix Issues at Factories

One of the tenets of our approach to partnering with factories is that we work to fix what we find. This means we have a comprehensive process in place to address issues. Specifically, we work with factories to agree on specific, time-bound plans to correct issues that do not meet our requirements for legal compliance, labor and working conditions, and management practices. We have devoted additional resources to fixing key issues at factories that pose higher risks to workers’ rights and well-being as well as our business.

We monitor progress through follow-up visits and on-site meetings with unions if they are present in a factory. We also collaborate with local stakeholders to help identify and address factory issues when they may have more direct access and influence. This often leads to corrective actions that improve working conditions and protect workers’ rights.

We have evolved our rating methodology to more accurately assess factory performance and focus on the most critical issues.

Results

We closed 96 percent of critical open issues and 81 percent of non-critical open issues at red-rated factories in 2014.

For all rating levels, 70 and 68 percent of issues open at the beginning of fiscal 2013 and 2014 were resolved within six months, respectively. 91 and 94 percent of issues were corrected by the end of fiscal 2013.

Resolution of Factory Code of Vendor Conduct Issues Open as of 1/31/2013

  2/1/2013 5/1/2013
(3 months)
8/1/2013
(6 months)
2/1/2014
(1 year)
2/1/2015
(2 years)
Sourcing Country # of open
issues
# of open
issues
% resolved # of open
issues
% resolved # of open
issues
% resolved # of open
issues
% resolved
Greater China 1049 430 59% 234 78% 68 94% 45 96%
South Asia 792 517 35% 334 58% 122 85% 54 93%
Southeast Asia 953 537 44% 274 71% 40 96% 19 98%
Other Regions 217 137 37% 51 76% 34 84% 21 90%
Total 3011 1621 46% 893 70% 264 91% 139 95%

Resolution of Factory Code of Vendor Conduct Issues Open as of 1/31/2014

  2/1/2014 5/1/2014
(3 months)
8/1/2014
(6 months)
2/1/2015
(1 year)
Sourcing Country # of open
issues
# of open
issues
% resolved # of open
issues
% resolved # of open
issues
% resolved
Greater China 1086 680 37% 244 78% 58 95%
South Asia 1300 859 34% 426 67% 145 89%
Southeast Asia 1438 932 35% 535 63% 82 94%
Other Regions 249 211 15% 116 53% 46 82%
Total 4073 1621 60% 1321 68% 264 94%

To create wide-scale, sustainable change, we must support our suppliers in strengthening their own management practices.

Strengthening Factories’ Capabilities

To create widespread, sustainable change, we know that we must go beyond assessing and fixing issues at factories – we must support our suppliers in strengthening their own management. For this reason, capability-building programs are an important focus for us in helping factories create lasting improvements.

While we have helped suppliers improve their capabilities for close to a decade, we saw a need to focus our efforts and create a more structured program. In 2013-14, we created two separate field teams for social and environmental capability building that are dedicated to helping suppliers manage and improve the sustainability of their own operations.

For example, we provide training on good management practices, freedom of association and anti-corruption. We have also helped garment factories and fabric mills perform environmental impact assessments and share good practices by using the Sustainable Apparel Coalition’s Higg Index. We aim to achieve both reach and scale with our capability building efforts, enabling suppliers to share training programs, management systems and business processes with managers and workers across all of their factories.

Learn more about our work in Bangladesh, Cambodia and Myanmar in the section on Designing Country Strategies.