A decade of protesting youngsters just might feel righteously justified today. In an industry that has often been defensive about labor practices, Gap (NYSE: GPS) has gone against the grain. Today, the retailer admitted to poor, sometimes hazardous, working conditions revealed in thousands of inspections of its 3,000 overseas factories. In fact, it dropped a bomb by saying, "Few factories, if any, are in full compliance all of the time."
Gap packaged the admittance as part of its social responsibility initiatives. In fact, Gap said that the factories vying for its business often fail and that, in the end, due to conditions that aren't up to par, it only OKs about one out of six manufacturers to make its apparel.
Let's face it: For corporations, being socially responsible is likely becoming more and more hip. Starbucks (Nasdaq: SBUX) has made being a socially responsible company part of its theme; Google was compelled to write "Don't be evil" as part of its mission in its preliminary IPO prospectus. Citing the ways you are good for society, or for the environment, is very often very good PR.
Considering that this is a social climate that currently sees more than enough evil every day on television, it certainly isn't a bad idea to pay attention to social responsibility. Though Gap has been staging a sort of lackluster recovery, it still has its work cut out for it while other teen-oriented, mall-based shops -- for example, Urban Outfitters (Nasdaq: URBN) and Hot Topic (Nasdaq: HOTT) -- have enjoyed a sizzling sales season.
The coveted teen demographic -- which at one time crowded into Gap, Old Navy, and Banana Republic stores -- is one that tends to take corporations to task. Not all kids don black masks to chant and get teargassed at WTO demonstrations, but many do consider themselves socially responsible enough to think twice about a store's human rights record.
As for Gap's confession, did anybody really think anything much different about overseas manufacturing, regardless of how it is justified? Likely not. The specter of the "sweatshop" idea has hung over retailers for quite some time (though matched with the counterpoint that in many developing countries it actually represents an improved quality of life). How other retailers might react to Gap's revolutionary admission remains to be seen.
Today might seem like Gap's worst nightmare, but it may at some point get props for its honesty. And if it can cause positive change in the working conditions of workers worldwide, it might be a solid way for Gap to get back in kids' good graces.
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Alyce Lomax does not own shares of any companies mentioned.
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