Employ Respons Rights J (2007) 19:295303

DOI 10.1007/s10672-007-9055-x

Mind the Gap: A Journey to Sustainable Supply Chains

Sean Ansett

Published online: 10 October 2007

# Springer Science + Business Media, LLC 2007

Abstract Many companies still view Corporate Social Responsibility (CSR) as solely
philanthropy rather than addressing their material issues. A few companies that have began
to see the strategic advantages of being socially responsible and addressing their social,
environmental and economic challenges. Developing an effective strategy can reward
companies with reputation enhancement, license to operate, avoiding litigation, recruitment
and retention of employees and developing process, product and strategic innovations. One
company who has realized the value of investing and integrating CSR into the business
model is the apparel retailer Gap Inc. This article will examine the evolution of Gap Inc.
and its work developing an effective labor standards assurance program and stakeholder
engagement strategy transformed historically adversarial relationships with key stakeholders into collaborative multi-stakeholder partnerships. Particular attention is put towards
Gap Inc.s learnings in the process and how these new insights innovated the companys
CSR strategy over time.
Key words corporate social responsibility . stakeholder engagement
multi-stakeholder initiative . code of conduct . public private partnerships . innovation

Companies have made our world a global village. Now they must help keep it
livable. Because if it cant be made to work for all, in the end it will work for none.
John Ruggie, Special Representative of the UN Secretary General on Business and
Human Rights. (Gap Inc. 2007 CSR Report, pp 4).

Introduction
A large number of companies still view Corporate Social Responsibility (CSR) in a myopic
manner referring solely to their philanthropic pursuits. It is still just a few companies that
have began to see the strategic advantages of being socially responsible and addressing
their social, environmental and economic footprints. Developing an effective strategy can
reward companies with reputation enhancement, license to operate, avoiding litigation,
S. Ansett (*)
Calle San Mateo 18, 3 piso Centro, Madrid, Spain 28004
e-mail: sean@atstakeadvisors.com

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recruitment and retention of employees and developing process, product and strategic
innovations.
One company that has realized the value of investing and integrating CSR into the
business is the apparel retailer Gap Inc. Although the company is recognized to be a leader
in CSR today most notably for its supply chain human rights program this was not always
the case.
Gap Inc.s CSR program was not always highly regarded by stakeholders. As few as
10 years ago, the company was perceived as one of the poster children of globalization
gone wrong. Gap Inc.s evolution was not easy. In 2006, the company produced products
in over 2,000 factories in 50 countries around the world (Gap Inc., http://www.gapinc.
com/public/SocialResponsibility/sr_fac_wwf.shtml). Providing assurance remains a daunting,
resource intensive and complex task.
So how did the company transform itself from a corporate villain and the target of constant
protests to a respected and transparent organization in a relatively short period of time?
This article will examine the evolution of Gap Inc. and its work developing an effective
labor standards assurance program and how the company transformed historically adversarial
relationships with key stakeholders into collaborative multi-stakeholder partnerships.
Particular attention is put towards Gap Inc.s learnings in the process and how these new
insights helped with the innovation of the companys CSR strategy over time.
Simon Zadek of AccountAbility describes the path that organizations typically take when
developing a sense of corporate responsibility in five stages as they move along the learning
curve including (1) Defensive (deny practices and responsibility), (2) Compliance (adopt a
policy-based approach as a business cost), (3) Managerial (embed the societal issue into core
management processes), (4) Strategic (integrate the societal issue into their core business
strategies and (5) Civil (promote broad industry participation in corporate responsibility)
(Zadek 2004, p. 4). As Zadek suggests, Gap Inc. has passed through these stages as they
followed the path of responsibility moving from stakeholder pressure to dialog.
Clearly there is much work still to be done to improve labor standards for the millions of
workers working in global supply chains, but some positive changes have been realized
along the way. Unfortunately, many companies continue to employ crisis management
models to address corporate social responsibility issues that are largely ineffective and
waste resources.
Why are global apparel brands such a precarious place? To answer this question it is
important to understand the current context underlying the industry.

Context
The garment industry can positively impact the economy in many ways. As suggested by
Ivanka Mamic of the International Labor Organization, Garment manufacturing is a critical
source of employment and growth to many developing economies. The apparel industry is
often recognized as the stepping-stone to industrialization as garments may initially be
produced at home and then, with the influx of minimal capital, produced in factories.
Apparel production is labor-intensive, requiring few skills, and those that are required can
be learned on the job. Generally, as economies become more industrialized and wage
pressures increase the apparel industry declines in importance and countries focus on
developing more sophisticated industries such as electronics, computers and automobiles
(Mamic 2004, p. 149).

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On January 1st, 2005, the Multi Fiber Agreement was lifted removing all quotas on
garments putting workers jobs at risk and providing more flexibility for multinational
companies to develop new sourcing markets. Since then, garment industry supply chains
have continued to migrate to developing countries that offer lower wage rates, quality and
speed to market. Typically these countries are characterized as having a lack of government
enforcement of national and international labor laws due to resource constraints, lack of
infrastructure, fear of losing foreign direct investment and corruption. Global supply
chains have created new opportunities for labour-intensive exports from low-cost locations.
The result is a dramatic growth in the number of producers, heightening competition among
the worlds factories and farms for a place at the bottom of the chain. At the top end,
however, market share has tended to consolidate among a few leading retailers and brand
names (Raworth 2004, p. 34). The consolidation leads to increased risk for retailers and
makes them easy targets for campaigns that can seriously damage their brands and
reputations. Apparel brands tend to create an emotional connection with consumers making
them good targets unlike less sexy products such as hammers and nails.

Gap Inc.s Journey

Code Emergence
In 1991, Levis Strauss and Company was the first multinational company to develop
guidelines for sourcing the earliest code of conduct in the garment industry. Gap Inc.
followed suit in 1992. Gap Inc.s guidelines covered labor, environment, and health and
safety standards throughout the companys supply chain and placed responsibility on the
manufacturer to commit to implementing these guidelines in order start or continue a
business relationship with the brand. The policies were developed with good intentions but
relied heavily on trust that the manufacturer would in fact implement these requirements
with minimal oversight. In reality, the piece of paper meant little to the majority of
manufacturers and few improvements were made. Limited oversight of the guidelines
implementation was provided by sourcing, production and quality assurance personal rather
than professionals with appropriate expertise.
Wake Up Call El Salvador!
In 1995, the company was informed by the National Labor Committee that serious labor
rights violations were occurring at the Mandarin International factory in El Salvador
including infringements on freedom of association by factory management in response to
organizing activities taking place at the factory. A swat team of senior Gap Inc. representatives staff was sent to the factory site to discuss the issues with management, workers and
local non-governmental organizations (NGOs). Most of the allegations including union
busting turned out to be true and remediation plans were developed to resolve these issues.
Gap Inc. at this time also agreed to develop the industrys first independent monitoring
program involving local labor rights NGOs in El Salvador as well as expanding a similar
program to two additional Central America countries as part of the agreement.
The wake up call clearly demonstrated that the company needed to invest more in their
compliance program beyond the guidelines and develop a program that would bring the
piece of paper to life in factories.

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People Power
In 1996, the company enhanced the guidelines to reflect the companys current vendor code
of conduct and the company began to recruit and develop a global compliance team to
manage the inspection and enforcement of the code in factories. The team was developed to
have a small corporate presence in order to target resources on a large field team of vendor
compliance officers (VCOs) who monitored the factories on an ongoing basis. The VCOs
were charged with visiting factories, conducting sensorial inspections, reviewing documentation and interviewing workers to determine compliance with Gap Inc.s Code of Conduct.
Translators also were hired as needed for the worker interviews and areas for improvement
were discussed with management. Remediation plans were developed and follow-up visits
took place to ensure that recommendations were implemented. If a new factory failed to
comply, no production could take place until factory management corrected all outstanding
issues. The philosophy was to continue to work with factories to achieve continuous
improvement rather than cut and run. Ultimately, if no progress was made the business
relationship had to be terminated. The VCOs work was complemented by using external
monitoring companies to conduct audits. The company grew this team to over 90 members
over the next several years becoming at that time the largest internal monitoring team in the
industry.
Many of the teams members came from distinct disciplines and sectors including
NGOs, trade unions, journalists and former factory management. As the company
developed its internal team, contracts were discontinued with external auditors.
Although Gap Inc. was making a major investment in factory monitoring the company
continued to be insular in its external communications and engagement. Gap Inc. took a
defensive posture to criticism citing the size of its team and its comprehensive program to
demonstrate its good intentions. The management philosophy at the time was to continue
doing the good work but to keep quiet about the companys efforts and get caught doing
well. The failure of this strategy was that they never got caught doing well. Almost no
dialog was exchanged with external organizations and campaigns against the company
intensified.
Wake Up Call Saipan!
In 1999, Gap Inc. along with 25 other US retailers were brought to court over labor
conditions in the United States Commonwealth of Saipan including allegations of violating
federal law by using indentured labor, non-payment of overtime and intolerable living
conditions for the foreign contract workers who labored on the island.
In 2002, 26 retailers and 23 Saipan garment factories settled the lawsuit. The $20
million settlement and an independent monitoring program for the island were approved by
a federal judge in April 2003 (Clean Clothes Campaign, http://www.olympicflame.org/
legal/04-01-08.htm). The Saipan lawsuit was the second public wake up call that signaled
that monitoring alone was not the solution but only one of many interventions that are
needed to improve working conditions.
In response to the particular issues related to foreign contract work highlighted in the
Saipan lawsuit the company implemented a separate set of guidelines for foreign contract
workers and expectations for their vendors who used this type of labor.

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Come Together
During the late 1990s, new types of models were emerging called multi-stakeholder
initiatives (MSIs). In the US, the Fair Labor Association (FLA) was launched made up of
brands, NGOs, in addition to colleges and universities. The initiative was to provide a
check the checker process to evaluate how a company was performing in production
companies. Companies would agree to have a percentage of their factories audited by
accredited FLA monitoring organizations to evaluate the effectiveness of the companys
internal monitoring program.
Social Accountability International (SAI) along with its SA8000 standard was developed
including participation from NGOs, trade unions and companies. The SA8000 standard
provided a management systems-based approach and a certification scheme to factories
who implemented the standard in their operations.
In the United Kingdom (UK), the Ethical Trading Initiative (ETI) was formed with a
similar governing structure as SAI but its focus was to create a space for dialog between
sectors and to pilot collaborative approaches to improving labor conditions.
Gap Inc. noted these developments but did not choose to join any of these initiatives. In
1999, the company launched the Global Alliance for Workers and Communities (GA)
together with Nike Inc., the World Bank and the International Youth Foundation (IYF). GA
was focused on conducting needs assessments in factories in order to target capacity
building programs to address those needs. Some programs included health education,
canteen hygiene, personal finance and sexual harassment training. The Global Alliance
never found firm footing and closed shop in December of 2004; closure was primarily due
to a lack of stakeholder support particularly from key NGOs and trade unions, as well as
operational issues including a failure to recruit additional corporate members.
Wake Up Call Cambodia!
In 2000, a British Broadcasting Corporation Panorama report alleged that child labor was being
used in Gap Inc. contracting factories in Cambodia. Gap Inc. was only one of several retailers
using the factory in question. The journalist alleged that he knew of one worker who was
12 years old which was well under the legal minimum age of 15. Gap Inc. severed relations
with the factory but decided to stay committed to Cambodia. Other brands stopped sourcing
from Cambodia altogether and pulled their operations from the country. Gap Inc. changed its
expectations for factory management in Cambodia to verify age documentation. Currently,
management must verify age by checking the workers family book and by verifying the
workers government issued election or identification card (Gap Inc. 2003, p. 24).
Little or no engagement with external organizations beyond the Global Alliance partners
and the Independent Monitoring Working Group that was comprised of Business for Social
Responsibility, the Interfaith Center for Corporate Responsibility and the Center for
Reflection Education and Action that was launched as a result of the El Salvador incident
was taking place and the issues continued to be defined by external actors.
The constant attacks and campaigns impacted employee morale, the companys
reputation and drained management resources. The campaigns were successful in
challenging the company to seek new ways to address these issues and the need to engage
stakeholders emerged as a priority.

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Engagement
In 2001, the company embarked on a path of new engagement with external stakeholders
using their existing limited relationships as a springboard. The start up program was called
External Relations but would quickly be transformed into what is now called Global
Partnerships. The main function of the newly formed strategic group was to develop
relationships and in some cases partnerships with global and local stakeholders,
complementing the work of the Vendor Compliance Officers.
The starting point in developing the strategy was simple. The company sent a senior
manager on a road trip to talk and more importantly listen to key stakeholders. For
example, the manager would ask: (1) What is the company doing well? (2) What should the
company stop doing? (3) What should the company start doing? Equally important the
company started to educate stakeholders about what the company was doing and its future
direction. Based on the insights gathered, the company began to identify opportunity areas
that would lead to improvements. The company then identified and mapped its key stakeholders and began an internal education process about the value of engagement. Finally, the
company opened its kimono and allowed greater access to civil society groups.
Some of the core issues that were teased out of the engagement process were acted upon
either directly because of the engagement or due to timing. A few examples included the
setting of the Saipan lawsuit, reaching a collaborative agreement with the US textile worker
union UNITE!, supporting a worker run factory called Just Garments in El Salvador and
resolving ongoing labor rights issues with suppliers in Lesotho, Thailand and El Salvador.
In 2003 and 2004, respectively, the company also joined the Ethical Trading Initiative and
Social Accountability International thus beginning its foray into multi-stakeholder engagement.
Gap Inc.s action not words approach began to pay off for the company. The welldesigned and executed strategy allowed the company to begin to identify emerging issues
evolving its approach from reactive to proactive, improving its credibility with key
stakeholders who were more willing to collaborate with the company. Gap Inc. began to be
perceived as part of the solution rather than part of the problem.
Public campaigns were significantly reduced as problems were being resolved before
they snowballed into the public realm. The ability to resolve these issues without having to
fight a public campaign allowed the company to help facilitate more sustainable solutions
with factory management.
Much of the success of the stakeholder engagement strategy was based on the
embedding of AccountAbilitys AA1000 and key principles into operations including
completeness, materiality and responsiveness. AccountAbility describes the concepts in
this way: (1) Completeness is the practice of collecting and analyzing key information
outside and inside the organization to enable the business to make informed decisions, (2)
Materiality identifying and addressing the most material impacts related to its business
operations and strategy, as well the stakeholders affected, (3) Responsiveness is building
capacity in senior management and employees to understand stakeholder concerns and
preparing the company to address these concerns and expectations adequately (Accountability, UNEP and Stakeholder Research Associates 2005). These three principles are at the
core of developing a strong stakeholder engagement platform.
Transparency
In 2003, the company released its first public social responsibility report in order to
communicate with a broader audience including its own employees. The report was

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groundbreaking including a warts and all look at the companys challenges in their supply
chain, a call to action to industry peers and raising the transparency bar for future reporters.
The report marked the first time the company had allowed a glimpse into its internal
operations and factory conditions.
The reports transparency further enhanced the companys credibility among key
stakeholder groups and demonstrated Gap Inc.s commitment to tackling these issues. The
company has published subsequent reports. The 2007 report includes richer information on
environmental and employee issues than in previous years.
Collaboration
A growing number of stakeholders are realizing that they cannot solve the worlds problems
alone and that they can benefit from working with each other. The developments over the
past 10 years, specifically in the apparel sector, are leading to increased partnerships
between NGOs, companies and trade unions.
Each sector is realizing the value of sharing their respective competencies, expertise,
resources and local knowledge to develop solutions. According to Steve Waddell, NGOs are
providing a means of linking the economic and production oriented world of business with
the social and value-generating one of civil society. At one level, this translates into providing
linkages to low-income people and interest groups that the comparatively wealthy, expensive
and elite world of business has difficulty connecting with and understanding.
At another level, this means making business aware of issues not immediately involved
in production, such as the environment, poverty, social inequality and social justice
(Waddell 2000, p. 205).
Gap Inc.s participation in two multi-stakeholder initiatives with ETI and SAI enabled
the company to continue to develop new relationships and learn from peer companies and
other stakeholders and it began to challenge the internal and external status quo.
One area that was challenged was Gap Inc.s own internal purchasing practices and how
these practices might be part of the problem. Through its participation in ETI, Gap Inc.
partnered with Womens Working Worldwide (WWW) a UK-based labor rights NGO, to
examine the companys purchasing practices. WWW found that Gap Inc.s product lead
times, delays in approvals and last minute changes in styles could negatively impact
working conditions that might have led to illegal subcontracting and overtime as well as
increasing costs to Gap Inc. http://www.gapinc.com/public/documents/www_study.pdf.
The company examined the findings and worked internally to change practice to not only
improve working conditions but also lower costs and improve relationships with suppliers.
Gap Inc. also realized the importance of developing training programs to improve
supplier understanding about international labor standards. Joint worker and management
trainings were developed on national and international labor law including the development
of internal dispute mechanisms. Investments were made in productivity trainings for
vendors and other complementary programs to try to address the root cause of issues. These
intervention points when carried out successfully resulted in improved productivity, lower
worker turnover, better use of materials and less waste and improved wages providing a
winwinwin for factory management, workers and brands http://www.gapinc.com/public/
documents/impactt_hkpc_results.pdf p 1.
In 2006, Gap Inc. partnered with the International Textile and Garment Leather Workers
Federation to train the companys internal monitoring team on Freedom of Association and
Collective Bargaining issues. In 2007, the company and the ITGLWF hosted a joint training
for their approved Cambodian suppliers bringing together factories, global and local trade

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union representatives, the International Labor Organization (ILO) and US government

officials in order to raise issues of concern in the workplace and seek solutions. Participants
hoped to develop similar dialogs that would take place within the factory (Gap Inc. 2007
CSR Report). These collaborative arrangements seek to improve industrial relations
between management and worker representatives in order to build sustainability into the
process and resolve issues on the factory floor rather than through a policing model
which has limited impact and creates distrust between parties.
Civil Space
The latest development in Gap Inc.s pursuit in engaging more broadly is the companys
participation as a founding member in the MFA Forum thus entering into the civil space of
social responsibility. The MFA Forum was established in early 2004, in response to
growing anticipation throughout the garment and textile industry that the phase-out of
quotas would lead to major changes in the sourcing of garments, and potentially negative
consequences for countries that had come to rely on garments exports (MFA Forum, http://
www.mfa-forum.net). The MFA Forum includes participation from organizations such as
the ILO, Oxfam, Maquiladora Solidarity Network and Marks and Spencer.
The MFA Forum developed programs in Bangladesh and Lesotho to assist these
countries and their respective governments with the post MFA transition as well. The
MFAs technical assistance helps to develop responsible competitiveness frameworks in
order to maintain and grow foreign direct investment.
Active participation in the MFA Forum has transformed Gap Inc.s program to focus more
on civil action and broader change working with governments and multilateral institutions.
Future Expectations
Global brands will continue to face increasing expectations by stakeholders as their
operating environment changes and stakeholders become more educated on the core issues
facing the industry. Future issues emerging for apparel companies include the need to
provide deeper assurance into the supply chain, full supply chain disclosure and the
adoption of a common code of conduct like the JO-INs (the Joint Initiative on Corporate
Responsibility and Workers Rights) code.
Traditionally, compliance models in the garment sector primarily focused on the cut and
sew operations forward or the point where the textile is transformed into garments. But like
an iceberg much risk remains underneath this level of production from the heavy use of
water and in some cases forced child labor used to harvest the cotton in countries like
Uzbekistan, to the ginning of the cotton and its transport to the large textile mills that
largely have not been subject to monitoring or oversight.
A number of companies including Nike Inc., Levis & Co., Reebok and Timberland have
recently disclosed their contracting factories names and addresses globally. Supply chain
disclosure by these companies allows stakeholders to check on labor conditions directly and
utilize their local networks in-country including more direct discussions with workers.
JO-IN is a multi-stakeholder initiative made up of all the key initiatives including the
Workers Rights Consortium, the Clean Clothes Campaign, the Fair Wear Foundation,
Social Accountability International, the Fair Labor Association and the Ethical Trading
Initiative. JO-IN successfully developed a common code of conduct by adopting the highest
standard from their existing codes, international conventions with the intention of easing

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the proliferation of codes of conduct and the confusion this has created. The initiative is
testing the implementation of such a code with initial pilots taking place in Turkey.
It is important to note that Gap Inc. like the majority of companies has yet to monitor
labor conditions beyond cut and sew. Gap Inc. has not disclosed its factory list or adopted
the universal code. Will Gap Inc. continue to maintain its leadership and continue along the
path to sustainability?
Concluding Thoughts
The field of social responsibility is rapidly evolving. It is becoming important for
companies to integrate their acquired knowledge into corporate strategy to make their
programs sustainable over the long term. Stakeholders are savvier at shifting the lines of
traditional responsibility with more focus on companies.
Gap Inc. has gone through a cycle of institutional learning. The wake up calls including
El Salvador, Cambodia and the Saipan litigation served as an impetus for retooling the way
things got done within the company.
The company has evolved its practices and approaches through developing an effective
stakeholder engagement strategy and creating spaces for dialog with its critics and other
stakeholders. Constructive dialog has been the key to understanding the needs of each
sector, identifying collaborative spaces for collective action, building respect and
transforming the companys approach.
There is clearly much to do to improve the garment workers quality of life. Gap Inc.
seems to be marching along an enlightened path even if perhaps at times it requires taking
one step forward and two steps back. Is Gap Inc. developing a truly civil corporation that is
built to last? Time will tell.

References
Accountability, UNEP and Stakeholder Research Associates (2005). The Stakeholder Engagement Manual
Volume 2: The Practitioners Handbook on Stakeholder Engagement.
Clean Clothes Campaign. http://www.olympicflame.org/legal/04-01-08.htm
Gap Inc. 2003 CSR Report. http://ccbn.mobular.net/ccbn/7/645/696/index.html.
Gap Inc. 2007 CSR Report. http://www.gapinc.com/public/documents/CSR_Report_05_06.pdf.
Mamic, I. (2004). Implementing code of conduct: How businesses manage social performance in global
supply chains. Geneva and Sheffield: International Labor Organization in association with Greenleaf
Publishing.
MFA Forum. http://www.mfa-forum.net.
Raworth, K. (2004). Trading away our rights: Women working in global supply chains. Oxford: Oxfam
International.
Waddell, S. (2000). Complementary resources: The winwin rationale for partnerships with NGOs. In J.
Bendell (Ed.), Terms of endearment: Business, NGOs and sustainable development. Sheffield:
Greenleaf.
Zadek, S. (2004). The path to corporate responsibility. Harvard Business Review, 82, 125133.