Press Release

08/16/2007

GAP INC. CONTINUES ITS COMMITMENT TO TRANSPARENCY IN ITS THIRD SOCIAL RESPONSIBILITY REPORT

Highlights progress on ethical sourcing, environmental sustainability and community investment initiatives that are good for business and the right thing to do

SAN FRANCISCO – August 16, 2007 – Gap Inc. (NYSE: GPS) today released its third and most comprehensive Social Responsibility Report, highlighting the company’s commitment to social responsibility. This year’s report, covering fiscal years 2005-2006, details the company’s progress and goals for initiatives involving its supply chain, community investment, employees and the environment. 

From 2005 to 2006, the number of approved garment factories earning the company’s highest compliance ratings continued to increase. In fact, 61 percent of Gap’s contracted garment factories are currently rated “Good” or “Excellent,” indicating that progress is being made to improve the working conditions at many factories in the company’s supply chain.

“We’re making a lot of changes at Gap Inc. but, as our Social Responsibility Report demonstrates, doing business the right way is still extremely important to us,” said Robert Fisher, former interim CEO and current member of Gap Inc.’s board of directors. “We have an unwavering commitment to our social responsibility program; it’s good for business and we know it’s the right thing to do.”

Gap Inc.’s recently appointed chairman and CEO Glenn Murphy said, “Gap Inc.’s commitment to doing business in a socially responsible manner is a fundamental part of who we are, especially for our employees and our customers. Reflected in this report is the hard work and passion of our employees to uphold our brand values, which truly set Gap, Old Navy and Banana Republic apart as socially conscious brands.”

The new report is designed around provocative questions highlighting the complex issues that Gap Inc. – and the entire apparel industry – faces and illustrates the company’s commitment to ongoing dialogue and collaboration.

“We believe we should go beyond the basics of ethical business practices to embrace our role as a global citizen,” said Dan Henkle, senior vice president of Social Responsibility, Gap Inc. “Each section of the report explains our progress in key areas and raises new challenges we’ve identified through our experiences. We believe that our transparency will encourage other companies to take similar actions.”

Gap Inc. engaged a number of stakeholders for feedback and input, including the Public Reporting Working Group. Six organizations – the As You Sow Foundation, Calvert, the Center for Reflection, Education and Action, Domini Social Investments, the Interfaith Center on Corporate Responsibility, and Vectra International – comprise the group. The Public Reporting Working Group has helped Gap Inc. explore opportunities for greater transparency and sustainability of its expanding social responsibility efforts over the past five years.

“This new report continues to set the pace for public reporting about global labor standards compliance,” said Ruth Rosenbaum, PhD, executive director, Center for Reflection, Education and Action, Inc., on behalf of the Public Reporting Working Group. “Gap continues to demonstrate a dynamic approach to factory compliance, focusing on auditing as well as a broader framework including worker empowerment, capacity building, and long-term partnerships to reduce the impact of factory relocations. But it is disappointing that three years after Gap’s first report, so few companies have issued anything approaching the credibility and transparency of Gap’s initial effort. With few exceptions, the state of public reporting on supply chain compliance has changed very little.”

The full report is available online at gapinc.com/socialresponsibilityreport.

Supply Chain
Gap Inc. is committed to improving working conditions in the more than 2,000 garment factories with which it contracts. The company has a team of more than 90 people around the world who work to improve the lives of garment workers. To ensure these factories were adhering to the company’s standards, last year, Gap Inc.’s internal compliance team conducted 4,316 inspections in 2,053, or 99.4 percent, of the garment factories.

In 2006, Gap Inc. partnered with Women Working Worldwide (WWW) to assess the company’s purchasing practices to understand how to make better decisions as an organization. Findings from the assessment will guide development of training materials to help production planners and merchants understand the impact that their decisions can have on the working conditions of factories. This work is an ongoing priority for the company.

“Gap Inc. clearly puts an impressive amount of resources into ethical trade, and its work with Women Working Worldwide on purchasing practices is truly pioneering,” said Dan Rees, director, Ethical Trading Initiative (ETI). “Gap is playing a leadership role in encouraging companies to investigate ways of integrating their ethical trade principles into core business practices.”

Environment
The new report introduces the company’s new environmental strategy – summarized by the acronym “ECO” – which focuses Gap Inc.’s efforts on three key areas: Energy conservation; Cotton/sustainable design; and Output/waste reduction. 

Between 2003 and 2006, the company decreased energy use in U.S. stores by 8.7 percent and increased its paper and cardboard recycling in North American stores, distribution centers and headquarters by more than 90 percent. And this year, Gap brand introduced new products in its stores in the U.S., U.K., Canada and France made from 100 percent organic cotton.

Community Investment
Through Gap Foundation’s efforts to serve communities where the company does business, employees contributed substantially more time to non-profit organizations. Employees nearly tripled the hours volunteered, from just over 72,000 hours in 2004 to almost 220,000 hours in 2006.

Beginning with the 2005-2006 Social Responsibility Report, Gap Inc. will report comprehensively on its social responsibility efforts every two years. This will allow the company to focus its efforts on affecting positive, lasting change and report more meaningful results. The company’s next report is scheduled for release in 2009; however, the company will continue to provide ongoing updates on gapinc.com between published reports.

About Gap Inc.
Gap Inc. is a leading international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic, Old Navy and Piperlime brand names. Fiscal 2006 sales were $15.9 billion. Gap Inc. operates more than 3,100 stores in the United States, the United Kingdom, Canada, France, Ireland and Japan. In addition, Gap Inc. is expanding its international presence with franchise agreements for Gap and Banana Republic in Asia and the Middle East. For more information, please visit gapinc.com.

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