(PRODUCT) RED Combats HIV/AIDS by Funneling Portions of Sales to the Global Fund

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Gap Inc commits half of sales of its RED-branded product line to the Global Fund, exemplifying this new business model for generating sustainable funds for addressing the AIDS pandemic.

SocialFunds.com -- The business community response to the HIV/AIDS pandemic has been largely philanthropic, or individual companies such as Coca-Cola (ticker: KO) or Ford (F) addressing the issue as it affects their own operations. Now comes the (PRODUCT) RED campaign, the brainchild of U2 singer and activist Bono and Debt, AIDS, Trade, Africa Chair Bobby Shriver, which applies a strong business model to help solve HIV/AIDS with a focus on Africa. Six companies--including Gap, Motorola, Apple, and American Express - have signed on to create RED-branded products with significant portions of profits going to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

"(PRODUCT) RED is unique in the world of what they call 'cause-related marketing,'" said Dan Rosan, program director for public health at the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 faith-based institutional investors with over $100 billion in assets. "It's always important to be skeptical of any sort of social marketing or cause-related marketing."

"The key aspect of cause-related marketing is not some nebulous goal such as raising awareness--the key is the money," Mr. Rosan told SocialFunds.com. "The very important thing about (PRODUCT) RED is that the money is substantial--it will probably end up being in the hundreds of millions of dollars over many years, and the money goes to a very important place," namely the Global Fund.

While some cause-related marketing schemes allocate pittances to worthy causes, (PRODUCT) RED participants are putting their money where their mouth is. For example, the Gap has created a special line of (PRODUCT) RED clothes with half of profits going to the Global Fund. In addition to this direct support for HIV/AIDS prevention and mitigation, the Gap's (PRODUCT) RED line also addresses the issue through economic development in the affected regions.

"We viewed this as a perfect extension to work we already had underway--we've been sourcing out of Africa for about a decade and we have worked for years on the issue of HIV/AIDS in Africa," said Dan Henkle, senior vice president for social responsibility at Gap Inc. "Our (PRODUCT) RED t-shirts are produced out of Africa and are using 100 percent African cotton."

The Gap is producing these shirts out of Lesotho in sub-Saharan Africa, a country where it is estimated that up to a third of factory workers are HIV-positive.

"If you operate in an environment where very few people are getting tested and treated, obviously if left untreated, you have a lot of illness, a lot of people dying from this disease on a daily basis," Mr. Henkle told SocialFunds.com. "When factories are trying to be as competitive and productive as possible, this is not only a humanitarian issue that needs to be addressed, but it's also very vital to the economic development of countries dealing with this problem."

Gap Inc. sources from 50 countries, particularly in Southeast Asia, a region forecasted to experience the spread of the HIV/AIDS pandemic as severely as Africa now experiences it. Mr. Henkle sees the model pioneered with (PRODUCT) RED as a kind of pilot for addressing HIV/AIDS--as well as other critical issues specific to certain regions--throughout its global supply chain.

"As we roll out these initiatives, we need to be taking the learnings from them into other places we're operating," Mr. Henkle said, noting that the (PRODUCT) RED initiative has shifted the Gap's focus beyond policing for labor and human rights violations. "You can't just look at monitoring, you also have to look at what is going on in the communities where you're sourcing production--in Africa, a very critical issue is HIV/AIDS infection, in other countries it might be water."

The Global Fund, created in 2002 by the United Nations as a public-private partnership, has created a particularly effective model of working with affecting communities to address HIV infection as it impacts them locally.

"The Global Fund is globally recognized as one of the most effective economic development and health development tools that are out there," said Mr. Rosan. "It's different from the typical development agency because NGOs and community-based organizations and people living with HIV have to be included in the construction of its grants at the country level."

Countries applying for Global Fund money must also prove the effectiveness of their programs in order to continue qualifying for grant money by setting specific goals and then demonstrably meeting those goals.

"If you don't meet your goals, then the Global Fund doesn't necessarily give you the rest of your money until you prove you can meet your goal," explained Mr. Rosan. "The Global Fund rates all its grants on a very simple scale--you get an A, B, or C, and if you get a C, your funding is not renewed--so it's performance-based and it's effective."

Mr. Rosan notes that most of the Global Fund's money comes from countries, but this stream has been diminishing. The United States has decreased its contributions to the Global Fund, which is facing a budgetary shortfall for its 2007 fiscal year. (PRODUCT) RED thus represents an important new flow of money into the Global Fund.

"The Gap is saying, we have faith in the Global Fund," said Mr. Rosan. "People who control the real money, like George Bush and Bill Frist and Dennis Hastert, need to listen to what the Gap is saying and step up to put their resources into the Global Fund."

"I hope that this Gap announcement has that sort of catalytic effect," he concluded.

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