Updated from 6:04 p.m. EDTSAN FRANCISCO -- Gap ( GPS) says it will not allow apparel that had been sewn by children in a sweatshop in India to be sold at any of its stores. The specialty chain responded to articles that appeared in London's Observer newspaper, which described children as young as 10 years old laboring under grueling conditions for long hours and no pay at a sweatshop in New Delhi. "As soon as we were alerted to this situation, we stopped the work order and prevented the product from being sold in stores," said Marka Hansen, president of Gap brand, in a statement. Gap said work on the garments, which had been destined for the GapKids chain, had been parceled out to an unauthorized subcontractor in violation of the company's policies. "We have been making steady progress, and the children are now under the care of the local government," said Dan Henkle, Gap's senior vice president of social responsibility, in a statement. "As our policy requires, the vendor with which our order was originally placed will be required to provide the children with access to schooling and job training, pay them an ongoing wage and guarantee them jobs as soon as they reach the legal working age." The company said that only a small portion of the order placed with its vendors had been doled to the subcontractor.
"We strictly prohibit the use of child labor," Hansen said. "This is a non-negotiable for us, and we are deeply concerned and upset by this allegation." Gap had come under fire in the past for allowing its clothing to be manufactured inside factories with poor working conditions. In response to public pressure, the company began auditing its factories in 2004, looking for reoccurring problems such as overtime violations and noncompliance with child labor laws. In August, it put out its third social responsibility report, in which it found 61% of its contracted garment factories to be rated "good" or "excellent." The company contracts with more than 2,000 garment factories. It staffs a team of more than 90 people in charge of monitoring working conditions around the globe. Last year, the team conducted 4,316 inspections in 2,053 factories. Conrad MacKerron, director of the corporate social responsibility program at the As You Sow Foundation, a San Francisco shareholder-consulting group that supports campaigns for improved corporate environmental and labor practices, says that even with Gap's monitoring, it is still difficult to prevent abuse. "No matter how much money Gap or most other companies invest in this, the problem is so pervasive that it's going to slip through the cracks," says MacKerron, whose organization is one of several that Gap has consulted for input when conducting its social responsibility reports.
He points to Mattel ( MAT) as another company known for its strict standards that recently suffered a major setback when it was forced to recall millions of toys manufactured in China found to have excessive levels of lead paint. MacKerron adds that 80% of all retailers fall far below Gap and Mattel in terms of monitoring their supply chain. "Despite being the leaders and putting in more resources than their peers, you are not catching all the problems and you have a system that is prone to abuse until the system changes or until the government increases its regulation," he says. Shares of Gap closed Monday up 6 cents to $18.67.