Rating factories’ performance against our Code of Vendor Conduct is one of the most important things we do to seek to ensure safe and fair working conditions. We continually review our rating approach to maximize our ability to understand and improve factory performance. Over the past several years we have made some important changes to our ratings – affecting how we calculate them, classify them and share them with key decision-makers across our brands. These changes are described in detail below this chart.
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2009 - 2010 Factory ratings comparison
chart archive: 2005-2008
Note: Data represents fiscal year and includes factories producing Gap Inc. branded product that are part of our monitoring program and that were active during either the full year or partial year 2010. Partial-year factories include those that began or stopped working with Gap Inc. at some point during the fiscal year.
In 2009, improvements to our monitoring database enabled us to make our factory ratings methodology more comprehensive, providing a clearer picture of factory working conditions. One key methodology change is that we now look at a factory’s performance over time. Each time a factory is audited, it gets a new numeric score based on the most recent audit, which then gets averaged with up to three previous audits for that factory (depending on how many audits the factory has had). A rating that takes past performance into account helps us to better understand how a factory has performed over time.
As in our previous ratings methodology, we give more weight in our calculations to “key” issues such as excessive overtime. In addition to uniquely weighting key vs. non- key issues, our new ratings methodology allows us to account for habitual issues that have surfaced more than once. Finally, we have also started giving factories bonus points for incorporating best practices into their operations.
The database enabling the more complex ratings formula is automated, therefore allowing our Social Responsibility Specialists to quickly pull up a ratings report on any factory in the system when they are in the field. Likewise, we are more easily able to provide ratings data to employees making sourcing decisions.
We have changed our ratings categories to align them with existing Gap Inc. business standards such as quality. Instead of a number scale of 1-5, we’re now using a color scale with four major groupings: Green = Excellent, Light green = Good, Yellow = Fair, Red = Action required. Aligning our factory ratings categories with the categories used in our business standards will help our sourcing partners to use factory ratings as a tool to inform business decisions.
We share vendor ratings twice a year with the leadership teams at our different brands, as well as our sourcing group. Vendor ratings are calculated by averaging the ratings of factories under a specific vendor. Based on the vendor rating results, we are identifying which of our strategic vendors need to improve their performance and are crafting improvement plans for individual factories. In addition to targeting specific violations of our Code, we are seeking to address the root causes of problems. For instance, if a factory has required excessive overtime, it may be utilizing inadequate planning processes. Our Vendor Development Program is aimed at helping to ensure factories have the right human resource management systems in place to try and prevent problems from happening in the first place.
Our on-the-ground Social Responsibility Specialists oversee a factory’s actions against our improvement plan. Even if a factory has not moved into a different color category – for example, from red to yellow – it may still be making improvements. Behind each color category is a numerical range of scores that reveal a more nuanced view of a factory’s performance. Depending on the frequency of audits, it may take a couple years for a factory to change its color rating, given that the rating is based on an average of current and previous audits. Our aim is for factories to improve their numeric score as they progress towards the next color category.
We have put special focus on “action required” factories and we are also looking to involve our business partners to improve factory performance. One example: we’re partnering with our brands to ensure that their influence with vendors reinforces our actions to address performance issues, particularly with regard to factories that fall within the “action required” category.
Ultimately, the changes to our factory ratings and our Vendor Development Program support our broader goal: to shift away from simply “policing” factories to understanding and addressing the root causes of problems. We believe we have the responsibility to monitor factories and hold them accountable – while helping them improve through better systems and practices.