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March 2013
Spotlight on: Gap Inc

Fashion firm, Gap Inc, has long been steeped in controversy due to allegations of social and environmental
wrongdoings within its supply chain. It is not alone in this respect with many of its retail industry peers also
facing ongoing criticism for similar issues. Over the last few years, RepRisk has detected numerous NGO
reports, media articles and documented campaigns that target garment manufacturers for these issues and lay
blame on the companies sourcing from them. In the past two years, Gap Inc came close to reaching the ‘high
risk’ category according to the RepRisk Index, on several occasions.
In late 2012, it eventually attained a score in this realm, indicating recurrent environmental, social and
governance problems. The RepRisk database has also captured allegations made against the company by
independent third parties that date back several years prior to this period. Gap has been linked to procurement
controversies in several countries, many of which are considered to have poorly implemented employee health
and safety standards, as well as dubious unionization policies. These include India, Bangladesh, Sri Lanka,
Cambodia, Indonesia, and the Philippines among others. A 2011 report by NGO War on Want, entitled ‘Stitched
Up,’ aimed to expose the alleged abuse of female workers’ rights in these Asian countries. It claimed that
exploitation was ongoing despite pledges by western retailers such as Gap, Zara, Primark, and Marks & Spencer
to observe a supplier code of conduct in regard to wages, working hours, and non-abusive environments. The
report detailed excessive working hours with compulsory unpaid overtime to meet production targets, beatings
and sexual discrimination by employers, as well as a lack of basic women’s rights including maternity leave and
statutory rest days.
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In the recent past, groups such as Anti-Slavery International and the Centre for Research on Multinational
Corporations (SOMO) have released reports naming major retailers, including Gap, which source from textile
manufacturers in India where unmarried women from lower caste families are targeted and forced to work 12
to 16 hours a day in “prison-like” conditions for less than minimum wage. According to activists, this amounts
to bonded labor. In Tamil Nadu state, for example, 200 former employees claimed they were promised lump
sum payments at the end of a three-year contract but did not receive this due to illness or termination of their
agreements. Gap has also been haunted by past accusations. In 2011, a blog addressing sweatshop production
at major retailers referred to older allegations, dating back to 2007, that children as young as eight had
produced garments at a Gap supplier factory in India. Allegedly, the children were sold into this environment to
help support their families, and worked 14-hour days without payment. Gap took immediate action, stating it
had been unaware of the subcontracting, and removed 10,000 items made in this particular factory from sale.
Back in 2010, up to 80,000 Cambodian garment workers were reported to have taken part in demonstrations
for better wages and benefits in the second half of the year. Labor activists targeted Gap, among several other
brands, for failure to put appropriate measures in place at their supplier factories. In the same year it was also
reported that in Cambodia, striking female workers at a factory owned by PCCS, allegedly a Gap supplier, were
beaten by police using tear gas and electric shock batons and forced back to work.
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In China, Gap was among a number of clothing retailers linked to environmental violations at supplier facilities
in a report entitled ‘Cleaning up the Fashion Industry.’ According to the report, the country’s textile industry
produces up to 2.5 billion tons of wastewater and other harmful pollutants every year, most of which end up
in China’s water bodies, soil, and groundwater. In 2011 and 2012, NGOs highlighted serious risks associated
with manufacturing in Bangladesh. The Clean Clothes Campaign reported that Gap, together with H&M, is one
of the largest buyers in the country and must take responsibility for improving the poverty wages. The country
apparently boasts the lowest pay in the world, the weakest regulation, and the worst attention to workplace
safety. This has reportedly resulted in the death of almost 500 garment factory workers over the past 5 years.
A 2010 fire killed 29 people in a Hameem Group factory supplying to major brands such as Gap. Most of the
victims were women earning less than USD 2 per day.
The tragedy was caused by unsafe conditions at the factory including an electric wiring overload that sparked
the flame and a lack of fire escapes. Managers had allegedly locked the factory doors, meaning the workers
were trapped inside. In December 2011, a boiler explosion at a Eurotex garment factory in Dhaka, which
reportedly supplies to Gap, resulted in the deaths of two workers and caused severe injuries to a further 62.
Several months later, NGO War on Want reported that Gap would take responsibility for the incident and offer
compensation and treatment to victims and their families.
While international companies have stated their willingness to establish a fire safety program and made some
efforts to do so, the working environment has allegedly not improved. Most recently, Gap was linked to Tazreen
Fashions’ garment factory, where a November 2012 blaze killed at least 111 workers and injured dozens
more. Over the past few years, Gap has also been linked to poor conditions at facilities in Central America. In
Honduras, it was accused of sourcing clothes from ‘maquilas’ – large industrial sweatshops where labor laws
and worker rights are reportedly often ignored. Factory employees allegedly earn less than a living wage and
are forced to do overtime to make up for the work hours lost due to a government-imposed curfew in the wake
of the 2009 military coup. In El Salvador, a similar situation reportedly existed at Ocean Sky factories, with
claims that Gap was one of the companies sourcing from them.
In Mexico, the company was named in a Greenpeace report, published in late 2012, as one of the international
retailers sourcing from a Kaltex facility, accused of discharging toxic chemicals and wastewater into water
bodies. The NGO urged all companies mentioned to take action to ensure their suppliers do not pollute.
In November 2012, Greenpeace released another report, ‘Toxic Threads,’ which accused 20 global brands,
including Gap, M&S, Esprit and Nike, of manufacturing clothing containing toxic chemicals that polluted
waterways and endangered human health, the environment and wildlife.
It appears that the issues
faced by Gap and its peers
in terms of labor rights and
environmental damage
in the companies’ supply
chains are ongoing and
occur on a global scale.
Such issues continue
to plague high-profile
fashion multinationals and
impact negatively on their
reputation. The question
of how risky this is for their
operations with respect to
business continuity, public
backlash, and government
regulation, remains to be
answered.
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DISCLAIMER
The information contained in this report (“Report”) is not intended to be relied upon as, or to be a substitute
for, specific professional advice. No responsibility for loss occasioned to any persons and legal entities acting on
or refraining from ac¬tion as a result of any material in this publication can be accepted. With respect to any
and all the information contained in this Report (“Information”), RepRisk makes no representation or warranty
of any kind, either express or implied, with respect to the Information, the results to be obtained by the use
thereof or any other matter. RepRisk merely collects information from public sources and distributes them
in the form of this Report. RepRisk expressly disclaims, and the buyer or reader waives, any and all implied
warranties, including, without limitation, warranties of origi¬nality, accuracy, completeness, merchantability,
fitness for a particular purpose and warranties related to possible violations of intellectual property rights,
trademark rights or any other rights of any third party. This report may be quoted, used for business purposes
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METHODOLOGY
RepRisk special reports are compiled using information from the RepRisk database, which consists of facts,
criticism and controversies related to projects and companies’ environmental, social and governance
performance. The RepRisk data¬base currently contains criticism on more than 30,000 private and publicly
listed companies. RepRisk analysts monitor the issues related to environmental, social and governance
risk across a broad shareholder and other stakeholder audience of NGOs, academics, media, politicians,
regulators and communities. Once the negative news has been identified with ad¬vanced search algorithms
and analyzed for its novelty, relevance and severity, risk analysts enter an original summary into the database
and link it to the companies and projects in question. No article is entered twice unless it has been escalated
to a more influential source, contains a significant development, or has not appeared for the past 6 weeks.
This helps to ensure the balanced and objective rating and weighting of the negative news, and thus the
company’s quantitative measure of risk exposure, the RepRisk Index (RRI). The RRI measures the risk to a
company’s reputation, not its actual reputation in general. RepRisk objectively monitors the level of criticism
to which a company is exposed. All data is collected and processed through a strictly rule-based methodology.
Controversial issues covered include breaches of national or international leg¬islation, controversial products
and services, environmental footprint and climate change, human rights and community relations, labor
conditions and employee relations as well as fraud, anti-competitive behavior tax evasion and corruption. In
particular, all principles of the UN Global Compact are addressed.
ABOUT REPRISK
RepRisk is the leading provider of business intelligence on environmental, social and governance (ESG) risks.
It systematically collects and analyzes facts, criticism, and controversies related to companies and projects
worldwide. It does so on a daily basis and in 13 languages from thousands of public sources including
international and local media, government sites, non-governmental organizations (NGOs), newsletters, social
media and blogs. The RepRisk database currently includes information on over 30,000 companies, 6,500
projects, 5,000 NGOs and 4,000 governmental bodies. These numbers are continuously growing as relevant
ESG information is added. The use of RepRisk business intelligence allows companies and financial institutions
to proactively assess ESG issues that may present financial, reputational and compliance risks. For more
information about the usage and benefits of RepRisk in relation to the effective management of ESG Risk,
please visit our website: www.reprisk.com
Contact Information
For more information about the RepRisk tool or this Spotlight on Gap Inc Report, please
contact media@reprisk.com or visit our website: www.reprisk.com.
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